<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/21<br>Title: Livestock for the poor: under what conditions?<br>Author-Name: Britta Augsburg<br>Author-X-Name-First: Britta<br>Author-X-Name-Last: Augsburg<br>Author-Email: britta_a@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201112<br>Length: <br>Number: W11/21<br>Abstract: &lt;p&gt;&lt;p&gt;This study evaluates an intervention in the dairy subsector by an Indian livelihood promotion institution and conducts a detailed analysis of the main cost and benefit factors of the activity. Two rounds of data are available which allows for the comparison of impacts and costs and benets under different circumstances - a relatively good year as well as one officially declared as a drought period. Results suggest that the programme is benecial but impacts cannot be sustained under the macro shock. Looking at the main cost factors reveals that fodder availability was a major problem. The results help to suggest an improved programme design.&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1121.pdf<br>File-Format: application/pdf<br>File-Size: 280<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/20<br>Title: Group lending or individual lending?  Evidence from a randomised field  experiment in Mongolia<br>Author-Name: Orazio Attanasio<br>Author-X-Name-First: Orazio<br>Author-X-Name-Last: Attanasio<br>Author-Email: o.attanasio@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Britta Augsburg<br>Author-X-Name-First: Britta<br>Author-X-Name-Last: Augsburg<br>Author-Email: britta_a@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name:  Ralph de Haas<br>Author-X-Name-First: Ralph<br>Author-X-Name-Last:  Haas<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Emla Fitzsimons<br>Author-X-Name-First: Emla<br>Author-X-Name-Last: Fitzsimons<br>Author-Email: e.fitzsimons@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Heike Harmgart<br>Author-X-Name-First: Heike<br>Author-X-Name-Last: Harmgart<br>Author-Email: HarmgarH@ebrd.com<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201112<br>Length: <br>Number: W11/20<br>Abstract: &lt;p&gt;Although microfinance institutions across the world are moving from group lending towards individual lending, this strategic shift is not substantiated by sufficient empirical evidence on the impact of both types of lending on borrowers. We present such evidence from a randomised field experiment in rural Mongolia. We find a positive impact of access to group loans on food consumption and entrepreneurship. Among households that were offered group loans the likelihood of owning an enterprise increases by ten per cent more than in control villages. Enterprise profits increase over time as well, particularly for the less-educated. For individual lending on the other hand, we detect no significant increase in consumption or enterprise ownership. These results are in line with theories that stress the disciplining effect of group lending: joint liability may deter borrowers from using loans for non-investment purposes. Our results on informal transfers are consistent with this hypothesis. Borrowers in group-lending villages are less likely to make informal transfers to families and friends while borrowers in individual-lending villages are more likely to do so. We find no significant difference in repayment rates between the two lending programs, neither of which entailed weekly repayment meetings.&lt;/p&gt;<br>Classification-JEL: 016, G21, D21, I32<br>Keywords: Microcredit; group lending; poverty; access to finance; randomised field experiment<br>File-URL:http://www.ifs.org.uk/wps/wp1120.pdf<br>File-Format: application/pdf<br>File-Size: 793<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/19<br>Title: Individual notions of distributive justice and relative economic status<br>Author-Name: Abigail Barr<br>Author-X-Name-First: Abigail<br>Author-X-Name-Last: Barr<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Oxford<br>Author-Name:  Justine Burns<br>Author-X-Name-First: Justine<br>Author-X-Name-Last:  Burns<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Luis Miller<br>Author-X-Name-First: Luis<br>Author-X-Name-Last:  Miller<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Ingrid Shaw<br>Author-X-Name-First: Ingrid<br>Author-X-Name-Last:  Shaw<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 201110<br>Length: <br>Number: W11/19<br>Abstract: &lt;p&gt;Issues of inequality, distribution and redistribution are commanding progressively more attention in the minds of not only world leaders, politicians, and academics but also of ordinary people. So, what constitutes distributive justice in the minds of ordinary people? The philosophical literature offers several alternative principles of distributive justice. But which of these, if any, do ordinary people adopt as the principle against which to judge their own and other people's and entities' outcomes and actions?&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;This paper presents the findings from two experiments designed to test the hypothesis that individuals' notions of distributive justice are associated with their economic status relative to others within their own society. In the experiments, each participant played a specially designed distribution game. This game allowed us to establish whether and to what extent the participants perceived inequalities owing to differences in productivity rather than luck as just and, hence, not in need of redress.  A type of participant that distinguished between inequalities owing to productivity and luck, redressing the latter and not or to a lesser extent the former, is said to be subject to an earned endowment effect. Drawing on previous work in both economics and psychology, we hypothesised that the richer members of any society would be more likely to be subject to an earned endowment effect, while the poorer members would be more inclined towards redistribution irrespective of whether the inequality was owing to productivity or luck.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;We conducted our first experiment in the UK. We selected unemployed residents of one city to represent low economic status individuals and student and employed residents of the same city to represent relatively high economic status individuals. We found a statistically significant earned endowment effect among the students and employed and no effect among the unemployed. The difference between the unemployed and the others was also statistically significant. &lt;/p&gt;&lt;p&gt;Our second experiment was designed to test the generalizability of the findings from our first. It was conducted in Cape Town, South Africa. Exploiting the fact that Cape Town is home to one of the continent's best universities, we built a participant sample that was highly comparable to the UK sample in many regards. However, the states of employment and unemployment are less distinct in South Africa as compared to the UK and a number of interventions are in place to ensure that the student body of the University of Cape Town includes young people from not only rich and middle income but also poorer households. So, in South Africa we chose to rely on responses to a survey question to distinguish between high and low economic status individuals. The findings from this second experiment also supported the hypothesis; among individuals who classified their households as rich or high or middle income there was a statistically significant earned endowment effect, among individuals who classified their households as poor or low income there was not and the different between the two participant types was significant. &lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;We conclude that individuals' notions of distributive justice are associated with their relative economic status within society and that this is a generalizable result.&lt;/p&gt;<br>Classification-JEL: D63, C91, C93<br>Keywords: Distributive Justice; inequality; laboratory experiments.<br>File-URL:http://www.ifs.org.uk/wps/wp1119.pdf<br>File-Format: application/pdf<br>File-Size: 495<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/18<br>Title: Household consumption through recent recessions<br>Author-Name: Thomas Crossley<br>Author-X-Name-First: Thomas<br>Author-X-Name-Last: Crossley<br>Author-Email:  tfc22@cam.ac.uk <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Cambridge<br>Author-Name: Hamish Low<br>Author-X-Name-First: Hamish<br>Author-X-Name-Last: Low<br>Author-Email: Hamish.Low@econ.cam.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Trinity College, Cambridge<br>Author-Name: Cormac O'Dea<br>Author-X-Name-First: Cormac<br>Author-X-Name-Last: O'Dea<br>Author-Email: cormac_o@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201110<br>Length: <br>Number: W11/18<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;&lt;p&gt;&lt;p&gt;This paper examines trends in household consumption and saving behaviour in each of the last three recessions in the UK. We identify several dimensions along which the most recent recession (the so-called 'Great Recession') has been different from those that occurred in the 1980s and 1990s. These include its depth and length as well as the composition of the cutbacks in expenditure - with a greater reliance on cuts to nondurable expenditure than was seen in previous recessions. We show that, both inside and outside recessions, the extent to which the growth in durable purchases is more volatile than growth in nondurable purchases has declined over the past 15 years. Finally, we present evidence that suggests that two aspects of fiscal policy in the UK in 2008 and 2009 - the temporary reduction in the rate of VAT and a car scrappage scheme - had some success in encouraging households to bring forward some durable purchases.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1118.pdf<br>File-Format: application/pdf<br>File-Size: 1050<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/17<br>Title: The Impact of Tuition Fees and Support on University<br>Author-Name: Lorraine Dearden<br>Author-X-Name-First: Lorraine<br>Author-X-Name-Last: Dearden<br>Author-Email: l.dearden@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London<br>Author-Name: Emla Fitzsimons<br>Author-X-Name-First: Emla<br>Author-X-Name-Last: Fitzsimons<br>Author-Email: e.fitzsimons@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Gill Wyness<br>Author-X-Name-First: Gill<br>Author-X-Name-Last: Wyness<br>Author-Email: gill_w@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201109<br>Length: <br>Number: W11/17<br>Abstract: &lt;p&gt;Understanding how policy can affect university participation is important for understanding how governments can promote human capital accumulation. In this paper, we estimate the separate impacts of tuition fees and maintenance grants on the decision to enter university in the UK. We use Labour Force Survey data covering 1992-2007, a period of important variation in higher education finance, which saw the introduction of up-front tuition fees and the abolition of maintenance grants in 1998, followed some eight years later by a shift to higher deferred fees and the reinstatement of maintenance grants. We create a pseudo-panel of university participation of cohorts defined by sex, region of residence and family background, and estimate a number of different specifications on these aggregated data. Our findings show that tuition fees have had a significant negative effect on participation, with a &pound;1,000 increase in fees resulting in a decrease in participation of 3.9 percentage points, which equates to an elasticity of -0.14. Non-repayable support in the form of maintenance grants has had a positive effect on participation, with a &pound;1,000 increase in grants resulting in a 2.6 percentage point increase in participation, which equates to an elasticity of 0.18. These findings are comparable to, but of a slightly lower magnitude than, those in the related US literature. &lt;/p&gt;<br>Classification-JEL: I21, I22, I28<br>Keywords: university participation, higher education funding policies, tuition fees, maintenance grants, pseudo-panel<br>File-URL:http://www.ifs.org.uk/wps/wp1117.pdf<br>File-Format: application/pdf<br>File-Size: 485<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/16<br>Title: On-the-Job Search and Precautionary Savings: Theory and Empirics of Earnings and Wealth Inequality<br>Author-Name: Jeremy Lise<br>Author-X-Name-First: Jeremy<br>Author-X-Name-Last: Lise<br>Author-Email: j.lise@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 201109<br>Length: <br>Number: W11/16<br>Abstract: &lt;p&gt;I develop and estimate a model of the labor market in which precautionary savings interacts with labour market frictions to produce substantial inequality in wealth among ex ante identical workers. I show that a model of on-the-job search,in which workers are risk averse and markets are incomplete, provides a direct and intuitive link between the empirical earnings and wealth distributions. The&lt;/p&gt;&lt;p&gt;mechanism that generates the high degree of wealth inequality in the model is the dynamic of the &quot;wage ladder&quot; resulting from the search process. There is an important asymmetry between the incremental wage increases generated by on-thejob search (climbing the ladder) and the drop in income associated with job loss (falling off the ladder). The behavior of workers in low paying jobs is primarily governed by the expectation of wage growth, while the behavior of workers near the top of the distribution is driven by the possibility of job loss.&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1116.pdf<br>File-Format: application/pdf<br>File-Size: 817<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/15<br>Title: Innovation in China: the rise of Chinese inventors in the production of knowledge<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Helen Miller<br>Author-X-Name-First: Helen<br>Author-X-Name-Last: Miller<br>Author-Email: helen_m@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201109<br>Length: <br>Number: W11/15<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;In 2010 China was the world's fourth largest filer of patent applications. This followed a decade of unprecedented increases in investment in skills and Research and Development. If current trends continue China could rank first in the very near future. We provide evidence that the growth in Chinese patenting activity has been accompanied by a growth in Chinese inventors creating technologies that are near to the science base. &lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;Part of the success of China has been to attract the investment of foreign multinationals. This is also true for a number of other Emerging Economies. Europe's largest multinational firms increasingly file patent applications that are based on inventor activities located in emerging economies, often working alongside inventors from the firm's home country. &lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: F21; F23; O3<br>Keywords: China; innovation; offshoring; patents.<br>File-URL:http://www.ifs.org.uk/wps/wp1115.pdf<br>File-Format: application/pdf<br>File-Size: 1347<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/14<br>Title: The impact of a time-limited, targeted in-work benefit in the medium-term: an evaluation of In Work Credit<br>Author-Name: Mike Brewer<br>Author-X-Name-First: Mike<br>Author-X-Name-Last: Brewer<br>Author-Email: m.brewer@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and ISER, Essex University<br>Author-Name: James Browne<br>Author-X-Name-First: James<br>Author-X-Name-Last: Browne<br>Author-Email: j.browne@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Haroon Chowdry<br>Author-X-Name-First: Haroon<br>Author-X-Name-Last: Chowdry<br>Author-Email: haroon_c@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Claire Crawford<br>Author-X-Name-First: Claire<br>Author-X-Name-Last: Crawford<br>Author-Email: c.crawford@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201108<br>Length: <br>Number: W11/14<br>Abstract: &lt;p&gt;Conventional in-work benefits or tax credits are now well established as a policy instrument for increasing labour supply and tackling poverty.  A different sort of in-work credit is one where the payments are time-limited, conditional on previous receipt of welfare, and, perhaps, not means-tested. Such a design is cheaper, and perhaps better targeted, but potentially less effective. Using administrative data, this paper evaluates one such policy for lone parents in the UK which was piloted in around one third of the country. It finds that the policy did increase flows off welfare and into work, and that these positive effects did not diminish after recipients reached the 12 month time-limit for receiving the supplement. Most of the impact arose by speeding up welfare off-flows: the job retention of programme recipients was good, but this cannot be attributed to the programme itself.&lt;/p&gt;<br>Classification-JEL: H21, I38<br>Keywords: In-work benefits, labour supply, time-limits, welfare, lone parents.<br>File-URL:http://www.ifs.org.uk/wps/wp1114.pdf<br>File-Format: application/pdf<br>File-Size: 778<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/12<br>Title: Disability, health and retirement in the United Kingdom<br>Author-Name: James Banks<br>Author-X-Name-First: James<br>Author-X-Name-Last: Banks<br>Author-Email: j.banks@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Antoine Bozio<br>Author-X-Name-First: Antoine<br>Author-X-Name-Last: Bozio<br>Author-Email: antoine_b@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201107<br>Length: <br>Number: W11/12<br>Abstract: &lt;p&gt;This paper examines changes in health and disability related transfers in the UK over the last thirty years, and describes how they are related to changes in labour force participation. The objective is to present a comprehensive description of the reforms to the institutional setting, along with available time series coming from administrative data on benefit receipt, cross-section or panel data on self-reported health and their interactions with labour force status. By providing systematic evidence on institutions and data, we hope to help future research providing a fuller picture of the trends over this period. We also present evidence on the impact of two large reforms to disability benefits in the UK.&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1112.pdf<br>File-Format: application/pdf<br>File-Size: 1165<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/11<br>Title: The effect of education policy on crime: an intergenerational perspective<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name: M&aring;rten Palme<br>Author-X-Name-First: M&aring;rten<br>Author-X-Name-Last: Palme<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Stockholm<br>Author-Name:  Marieke Schnabel<br>Author-X-Name-First: Marieke<br>Author-X-Name-Last:  Schnabel<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 201107<br>Length: <br>Number: W11/11<br>Abstract: &lt;p&gt;The Swedish comprehensive school reform implied an extension of the number of years of compulsory school from 7 or 8 to 9 for the entire nation and was implemented as a social experiment by municipality between 1949 and 1962. A previous study (Meghir and Palme, 2005) has shown that this reform significantly increased the number of years of schooling as well as labor earnings of the children who went through the post reform&lt;/p&gt;&lt;p&gt;school system, in particular for individuals originating from homes with low educated fathers. This study estimates the impact of the reform on criminal behavior: both within the generation directly affected by the reform as well as their children. We use census data on all born in Sweden between 1945 and 1955 and all their children merged with individual register data on all convictions between 1981 and 2008. We find a significant inverse effect of the reform on criminal behavior of men and on sons to fathers who went through the new school system.&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1111.pdf<br>File-Format: application/pdf<br>File-Size: 825<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/10<br>Title: Cash by any other name? Evidence on labelling from the UK Winter Fuel Payment<br>Author-Name:  Timothy K.M. Beatty<br>Author-X-Name-First: Timothy<br>Author-X-Name-Last:  Beatty<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Laura Blow<br>Author-X-Name-First: Laura<br>Author-X-Name-Last: Blow<br>Author-Email: l.blow@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Thomas Crossley<br>Author-X-Name-First: Thomas<br>Author-X-Name-Last: Crossley<br>Author-Email:  tfc22@cam.ac.uk <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Cambridge<br>Author-Name: Cormac O'Dea<br>Author-X-Name-First: Cormac<br>Author-X-Name-Last: O'Dea<br>Author-Email: cormac_o@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201106<br>Length: <br>Number: W11/10<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;Standard economic theory implies that the labelling of cash transfers or cash-equivalents (e.g. child benefits, food stamps) should have no effect on spending patterns. The empirical literature to date does not contradict this proposition. We study the UK Winter Fuel Payment (WFP), a cash transfer to older households. Exploiting sharp eligibility criteria in a regression discontinuity design, we find robust evidence of a behavioural effect of the labelling. On average households spend 41% of the WFP on fuel. If the payment was treated as cash, we would expect households to spend approximately 3% of the payment on fuel.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1110.pdf<br>File-Format: application/pdf<br>File-Size: 185<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/09<br>Title: Is there a &quot;heat or eat&quot; trade-off in the UK?<br>Author-Name:  Timothy K.M. Beatty<br>Author-X-Name-First: Timothy<br>Author-X-Name-Last:  Beatty<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Laura Blow<br>Author-X-Name-First: Laura<br>Author-X-Name-Last: Blow<br>Author-Email: l.blow@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Thomas Crossley<br>Author-X-Name-First: Thomas<br>Author-X-Name-Last: Crossley<br>Author-Email:  tfc22@cam.ac.uk <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Cambridge<br>Creation-Date: 201106<br>Length: <br>Number: W11/09<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;&lt;p&gt;&lt;p&gt;&lt;p&gt;&lt;p&gt;In this research, funded by the Nuffield Foundation, we merge detailed household level expenditure data from older households with historical local weather information. We then test for a heat or eat trade off: do households cut back on food spending to finance the additional cost of keeping warm during cold shocks? We find evidence that the poorest of older households are unable to smooth spending over the worst temperature shocks. Statistically significant reductions in food spending are observed in response to temperatures two or more standard deviations colder than expected (which occur about one winter month in forty) and reductions in food expenditure are considerably larger in poorer households.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1109.pdf<br>File-Format: application/pdf<br>File-Size: 582<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/08<br>Title: FORTAX: UK tax and benefit system documentation<br>Author-Name: Jonathan Shaw<br>Author-X-Name-First: Jonathan<br>Author-X-Name-Last: Shaw<br>Author-Email: j.shaw@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201105<br>Length: <br>Number: W11/08<br>Abstract: &lt;p&gt;This document describes the UK tax and benefit system between April 1990 and April 2010, as implemented in FORTAX, a microsimulation library written in Fortran. It begins with an overview of FORTAX and the information it calculates. Subsequent sections describe the taxes and benefits implemented in FORTAX, noting where simplifications have been made. An appendix lists values of the major tax and benefit parameters over time.&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1108.pdf<br>File-Format: application/pdf<br>File-Size: 790<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/07<br>Title: Do consumers gamble to convexify?<br>Author-Name: Thomas Crossley<br>Author-X-Name-First: Thomas<br>Author-X-Name-Last: Crossley<br>Author-Email:  tfc22@cam.ac.uk <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Cambridge<br>Author-Name: Hamish Low<br>Author-X-Name-First: Hamish<br>Author-X-Name-Last: Low<br>Author-Email: Hamish.Low@econ.cam.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Trinity College, Cambridge<br>Author-Name: Sarah Smith<br>Author-X-Name-First: Sarah<br>Author-X-Name-Last: Smith<br>Author-Email: sarah.smith@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Centre for Market and Public Organisation<br>Creation-Date: 201105<br>Length: <br>Number: W11/07<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;When consumption goods are indivisible, individuals have to hold enough resources to cross a purchasing threshold. If individuals are liquidity constrained, they are unable to borrow to cross that threshold. Instead, we show that such individuals, even if risk averse, may choose to play gamble through playing lotteries to have a chance of crossing the threshold. One implication of this model is that income effects for individuals who choose to play lotteries are likely to be larger than for the general population. This in turn implies that estimating income effects through the random allocation of lottery winnings is likely to be a biased estimate of income effects of the broader population who chose not to gamble. Using UK data on lottery wins, other windfalls and durable good purchases, we show that lottery players display higher income effects than non-players but only amongst those likely to be credit constrained. This is consistent with credit constrained, risk-averse agents gambling in order to cross a purchase threshold and to convexify their budget set. &lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0711.pdf<br>File-Format: application/pdf<br>File-Size: 386<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/06<br>Title: The impact of minimum wages on quit, layoff and hiring rates<br>Author-Name:  Pierre Brochu<br>Author-X-Name-First: Pierre<br>Author-X-Name-Last:  Brochu<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  David A. Green<br>Author-X-Name-First: David<br>Author-X-Name-Last:  Green<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 201104<br>Length: <br>Number: W11/06<br>Abstract: &lt;p&gt;&lt;p&gt;We investigate differences in quit, layoff and hiring rates in high versus low minimum wage regimes using Canadian data spanning 1979 to 2008. The data include consistent questions on job tenure and reason for job separation for the whole period. Over the same time frame, there were over 140 minimum wage changes in Canada. We find that higher minimum wages are associated with lower hiring rates but also with lower job separation rates. Importantly, the reduced separation rates are due mainly to reductions in layoffs, occur in the first 6 months of a job, and are present for unskilled workers of all ages. Our estimates imply that a 10% increase in the minimum wage generates a 3.9% reduction in the layoff rate. We present a search and matching model that fits with these patterns and test its implications. Overall, our results imply that jobs in higher minimum wage regimes are more stable but harder to get. &lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1106.pdf<br>File-Format: application/pdf<br>File-Size: 487<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/05<br>Title: The effect of abolishing university tuition costs: evidence from Ireland  <br>Author-Name: Kevin Denny<br>Author-X-Name-First: Kevin<br>Author-X-Name-Last: Denny<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College Dublin<br>Creation-Date: 201103<br>Length: <br>Number: W11/05<br>Abstract: &lt;p&gt;University tuition fees for undergraduates were abolished in Ireland in 1996. This paper examines the effect of this reform on the socio-economic gradient to determine whether the reform was successful in achieving its objective of promoting educational equality that is improving the chances of low socio-economic status (SES) students progressing to university. It finds that the reform clearly did not have that effect. It is also shown that the university/SES gradient can be explained by differential performance at second level. Students from white collar backgrounds do significantly better in their final second level exams than the children of blue-collar workers. The results are very similar to recent findings for the UK. The results show that the effect of SES on school performance is generally stronger for those at the lower end of the conditional distribution of academic attainment.&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1105.pdf<br>File-Format: application/pdf<br>File-Size: 79<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/04<br>Title: The effect of childhood education on old age cognitive abilities: evidence from a Regression Discontinuity design<br>Author-Name: James Banks<br>Author-X-Name-First: James<br>Author-X-Name-Last: Banks<br>Author-Email: j.banks@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name:  Fabrizio Mazzonna<br>Author-X-Name-First: Fabrizio<br>Author-X-Name-Last:  Mazzonna<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 201103<br>Length: <br>Number: W11/04<br>Abstract: &lt;p&gt;We exploit the change to the minimum school-leaving age in the United Kingdom from 14 to 15 using a regression discontinuity design to evaluate the causal effect of one more year of education on cognitive abilities at older ages. We find a large and significant effect of this reform on males' memory and executive functioning measured using simple cognitive tests from the English Longitudinal Survey on Ageing (ELSA). This result is particularly remarkable since the 1947 reform had a powerful and immediate effect on about half the population of 14-yearolds. We investigate and discuss the potential channels by which this reform may have had its effects, as well as carrying out a full set of sensitivity analyses and robustness checks. &lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1104.pdf<br>File-Format: application/pdf<br>File-Size: 80<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/03<br>Title: The socio-economic gradient in early child outcomes: evidence from the Millennium Cohort Study<br>Author-Name: Lorraine Dearden<br>Author-X-Name-First: Lorraine<br>Author-X-Name-Last: Dearden<br>Author-Email: l.dearden@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London<br>Author-Name: Luke Sibieta<br>Author-X-Name-First: Luke<br>Author-X-Name-Last: Sibieta<br>Author-Email: luke_s@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Kathy Sylva<br>Author-X-Name-First: Kathy<br>Author-X-Name-Last: Sylva<br>Author-Email: kathy.sylva@edstud.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Oxford<br>Creation-Date: 201103<br>Length: <br>Number: W11/03<br>Abstract: &lt;p&gt;This paper shows that there are large differences in cognitive and socio-emotional development between children from rich and poor backgrounds at the age of 3, and that this gap widens by the age of 5. Children from poor backgrounds also face much less advantageous &quot;early childhood caring environments&quot; than children from better off families. For example we identify differences in poor children's and their mothers' health and well-being (e.g. birth-weight, breast-feeding, and maternal depression); family interactions (e.g. mother child closeness); the home learning environment (e.g. reading regularly to the child); parenting styles and rules (e.g. regular bed-times and meal-times), and experiences of childcare by ages 3 and 5. Differences in the home learning environment, particularly at the age of 3 have an important role to play in explaining why children from poorer backgrounds experience lower levels of cognitive development than children from better off families.  However, a much larger proportion of the gap remains unexplained, or appears directly related to other aspects of family background (such as mothers' age, and family size) that are not mediated through the early childhood caring environment. When it comes to socio-emotional development, a greater proportion of the socio-economic gap does appear to be related to differences in the early childhood caring environment. &lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1103.pdf<br>File-Format: application/pdf<br>File-Size: 79<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/02<br>Title: How much do lifetime earnings explain retirement resources?<br>Author-Name: Antoine Bozio<br>Author-X-Name-First: Antoine<br>Author-X-Name-Last: Bozio<br>Author-Email: antoine_b@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Gemma Tetlow<br>Author-X-Name-First: Gemma<br>Author-X-Name-Last: Tetlow<br>Author-Email: g.tetlow@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201102<br>Length: <br>Number: W11/02<br>Abstract: &lt;p&gt;We use a unique dataset, containing individual survey data from the English Longitudinal Study of Ageing linked to administrative data on earnings histories from administrative records, to construct measures of lifetime earnings and examine how these relate to financial resources in retirement. Retirement income and wealth at retirement is, as expected, positively correlated with lifetime earnings but there is also substantial dispersion in retirement income and retirement wealth among people with similar lifetime earnings. For example, we find that those with greater numerical ability and higher education tend to have greater retirement resources even after controlling for differences in lifetime earnings. The retirement resources of single women are far less well explained by their own lifetime earnings than those of couples or single men. We hypothesise that, as the vast majority of single women in the age group considered had previously been married and are now widowed or divorced, this reflects the fact that we do not observe the lifetime earnings of their former spouses. &lt;/p&gt;<br>Classification-JEL: D91, H25<br>Keywords: Lifetime earnings, savings, wealth, retirement<br>File-URL:http://www.ifs.org.uk/wps/wp1102.pdf<br>File-Format: application/pdf<br>File-Size: 1081<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:11/01<br>Title: Extensive and intensive margins of labour supply: working hours in the US, UK and France<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Antoine Bozio<br>Author-X-Name-First: Antoine<br>Author-X-Name-Last: Bozio<br>Author-Email: antoine_b@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Guy Laroque<br>Author-X-Name-First: Guy<br>Author-X-Name-Last: Laroque<br>Author-Email: laroque@ensae.fr<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 201102<br>Length: <br>Number: W11/01<br>Abstract: &lt;p&gt;&lt;p&gt;This paper documents the key stylised facts underlying the evolution of labour supply at the extensive and intensive margins in the last forty years in three countries: United-States, United-Kingdom and France. We develop a statistical decomposition that provides bounds on changes at the extensive and intensive margins. This decomposition is also shown to be coherent with the analysis of labour supply elasticities at these margins. We use detailed representative micro-datasets to examine the relative importance of the extensive and intensive margins in explaining the overall changes in total hours worked. We also present some initial estimates of the broad distribution of implied elasticities and their implication for the overall aggregate hours elasticity. &lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1101.pdf<br>File-Format: application/pdf<br>File-Size: 79<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/24<br>Title: Redistribution, work incentives and thirty years of UK tax and benefit reform<br>Author-Name: Stuart Adam<br>Author-X-Name-First: Stuart<br>Author-X-Name-Last: Adam<br>Author-Email: s.adam@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: James Browne<br>Author-X-Name-First: James<br>Author-X-Name-Last: Browne<br>Author-Email: j.browne@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201012<br>Length: <br>Number: W10/24<br>Abstract: &lt;p&gt;&lt;p&gt;Governments wishing to reduce inequality by redistributing money from the rich to the poor face the dilemma that in doing so (by increasing tax rates and means-tested benefits, for example) they reduce the incentive for individuals to increase their incomes. Policy-makers have tried to balance these objectives in different ways and, partly as a result of this, the tax and benefit system today is very different from the one that existed thirty years ago. In this paper we look at how the tax and benefit system redistributed income and affected incentives to work in 2009-10, and at the effect of tax and benefit reforms between 1978-79 and 2009-10 on the level of inequality and work incentives.&lt;/p&gt;&lt;/p&gt;<br>Keywords: tax, benefits, work incentives<br>File-URL:http://www.ifs.org.uk/wps/wp1024.pdf<br>File-Format: application/pdf<br>File-Size: 1030<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/23<br>Title: Child poverty in the UK since 1998-99: lessons from the past decade<br>Author-Name: Mike Brewer<br>Author-X-Name-First: Mike<br>Author-X-Name-Last: Brewer<br>Author-Email: m.brewer@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and ISER, Essex University<br>Author-Name: James Browne<br>Author-X-Name-First: James<br>Author-X-Name-Last: Browne<br>Author-Email: j.browne@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Robert Joyce<br>Author-X-Name-First: Robert<br>Author-X-Name-Last: Joyce<br>Author-Email: robert_j@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Luke Sibieta<br>Author-X-Name-First: Luke<br>Author-X-Name-Last: Sibieta<br>Author-Email: luke_s@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201010<br>Length: <br>Number: W10/23<br>Abstract: &lt;p&gt;&lt;p&gt;As a result of the Child Poverty Act (2010), current and future governments are committed to reducing the rate of relative income child poverty in the UK to 10% by 2020-21. This paper looks in detail at the progress made towards this goal under the previous Labour administrations. Direct tax and benefit reforms are very important in explaining at least three things: the large overall reduction in child poverty since 1998-99; the striking slowdown in progress towards the child poverty targets between 2004-05 and 2007-08; and some of the variation in child poverty trends between different groups of children. However, some of the child poverty-reducing impact of those reforms acted simply to stop child poverty rising as real earnings grew over the period, which increases median income and thus the relative poverty line. The performance of parents in the labour market is important too: between regions, parental employment and child poverty trends are closely related; the overall reduction in child poverty since 1998-99 has been helped by higher lone parent employment rates; and the overall rise in child poverty since 2004-05 has been most concentrated on children of one-earner couples, whose real earnings have fallen.&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1023.pdf<br>File-Format: application/pdf<br>File-Size: 1050<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/22<br>Title: What determines private school choice? a comparison between the UK and Australia<br>Author-Name: Lorraine Dearden<br>Author-X-Name-First: Lorraine<br>Author-X-Name-Last: Dearden<br>Author-Email: l.dearden@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London<br>Author-Name:  Chris Ryan<br>Author-X-Name-First: Chris<br>Author-X-Name-Last:  Ryan<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Luke Sibieta<br>Author-X-Name-First: Luke<br>Author-X-Name-Last: Sibieta<br>Author-Email: luke_s@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201009<br>Length: <br>Number: W10/22<br>Abstract: &lt;p&gt;&lt;p&gt;This paper compares patterns of private school attendance in the UK and Australia. About 6.5% of school children in the UK attend a private school, while 33% do so in Australia. We use comparable household panel data from the two countries to model attendance at a private school at age 15 or 16 as a function of household income and other child and parental characteristics. As one might expect, we observe a strong effect of household income on private school attendance. The addition of other household characteristics reduces this income elasticity, and reveals a strong degree of intergenerational transmission in both countries, with children being 8 percentage points more likely to attend a private school if one of their parents attended one in the UK, and anywhere up to 20 percentage points more likely in Australia. The analysis also reveals significant effects of parental education level, political preferences, religious background and the number of siblings on private school attendance.  &lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1022.pdf<br>File-Format: application/pdf<br>File-Size: 1180<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/21<br>Title: The demand for private schooling in England: the impact of price and quality<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Lorraine Dearden<br>Author-X-Name-First: Lorraine<br>Author-X-Name-Last: Dearden<br>Author-Email: l.dearden@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London<br>Author-Name: Luke Sibieta<br>Author-X-Name-First: Luke<br>Author-X-Name-Last: Sibieta<br>Author-Email: luke_s@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201009<br>Length: <br>Number: W10/21<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;In this paper we use English school level data from 1993 to 2008 aggregated up to small neighbourhood areas to look at the determinants of the demand for private education in England from the ages of 7 until 15 (the last year of compulsory schooling). We focus on the relative importance of price and quality of schooling.  However, there are likely to be unobservable factors that are correlated with private school prices and/or the quality of state schools that also impact on the demand for private schooling which could bias our estimates. Our long regional and local authority panel data allows us to employ a number of strategies to deal with this potential endogeneity. Because of the likely presence of incidental trends in our unobservables, we employ a double difference system GMM approach to remove both fixed effects and incidental trends. We find that the demand for private schooling is inversely related to private school fees  as well as the quality of state schooling in the local area at the time families were making key schooling choice decisions at the ages of 7, 11 and 13. We estimate that a one standard deviation increase in the private school day fee when parents/students are making these key decisions reduces the proportion attending private schools by around 0.33 percentage points which equates to an elasticity of around -0.26. This estimate is only significant for choices at age 7 (but the point estimates are very similar at the ages of 11 and 13). At age 11 and age 13, an increase in the quality of local state secondary reduces the probability of attending private schools. At age 11, a one standard deviation increase in state school quality reduces participation in private schools by 0.31 percentage points which equates to an elasticity of -0.21.  The effect at age 13 is slightly smaller, but still significant. Demand for private schooling at the ages of 8, 9, 10 and 12,  14 and 15 are almost entirely determined by private school demand in the previous year for the same cohort, and price and quality do not impact significantly on this decision other than through their initial influence on the key participation decisions at the ages of 7, 11 and 13. &lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1021.pdf<br>File-Format: application/pdf<br>File-Size: 100<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/20<br>Title: Empirically probing the quantity-quality model <br>Author-Name: Emla Fitzsimons<br>Author-X-Name-First: Emla<br>Author-X-Name-Last: Fitzsimons<br>Author-Email: e.fitzsimons@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Bansi Malde<br>Author-X-Name-First: Bansi<br>Author-X-Name-Last: Malde<br>Author-Email: bansi_m@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201009<br>Length: <br>Number: W10/20<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;This paper tests whether family size has a causal effect on girls' education in Mexico. It exploits son preference as the main source of random variation in the propensity to have more children, and estimates causal effects using instrumental variables. Overall, it finds no evidence of family size having an adverse effect on education, once the endogeneity of family size is accounted for. Results are robust to another commonly used instrument in this literature, the occurrence of twin births. A divisive concern throughout this literature is that the instruments are invalid, so that inferences including policy recommendations may be misleading. An important contribution of this paper is to allow for the possibility that the instruments are invalid and to provide an answer to the question of just how much the assumption of instrument exogeneity drives findings. It concludes that the assumption of exogeneity does not affect the results that much, and the effects of family size on girls' schooling remain extremely modest at most.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1020.pdf<br>File-Format: application/pdf<br>File-Size: 96<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/19<br>Title: Starting school and leaving welfare: the impact of public education on lone parents' welfare receipt<br>Author-Name: Mike Brewer<br>Author-X-Name-First: Mike<br>Author-X-Name-Last: Brewer<br>Author-Email: m.brewer@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and ISER, Essex University<br>Author-Name: Claire Crawford<br>Author-X-Name-First: Claire<br>Author-X-Name-Last: Crawford<br>Author-Email: c.crawford@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201009<br>Length: <br>Number: W10/19<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;b&gt;Please note:&lt;/b&gt; This paper was updated on 26 October 2010.&lt;/p&gt; &lt;p&gt;Childcare costs are often viewed as one of the biggest barriers to work, particularly among lone parents on low incomes. Children in England are eligible to attend free part-time nursery classes (equivalent to pre-kindergarten) from the academic term after they turn 3, and are typically eligible to start free fulltime public education on 1 September after they turn four. These rules mean that children born one day apart may start nursery classes up to four months apart, and may start school up to one year apart. We exploit these discontinuities to investigate the impact of a youngest child being eligible for part-time nursery education and full-time primary education on welfare receipt and employment patterns amongst lone parents receiving welfare. In contrast to previous studies, we are able to estimate the precise timing (relative to the date on which part-time or full-time education begins) of any impact on labour supply, by using rich administrative data. Amongst those receiving welfare when their youngest child is aged approximately three and a half, we find a small but significant effect of free full-time public education on both employment and welfare receipt (of around 2 percentage points, or 10-15 per cent), which peaks eight to nine months after the child becomes eligible (aged approximately 4 years and 9 months). We find weaker evidence of an even smaller effect of eligibility for part-time nursery education. This suggests that the expansion of public education programmes to younger disadvantaged children may only encourage a small number of low income lone parents to return to work (although, of course, this is not the primary aim of such programmes).&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: I21, J22<br>Keywords: Labour supply, school entry, regression discontinuity, lone parents, welfare receipt<br>File-URL:http://www.ifs.org.uk/wps/wp1019.pdf<br>File-Format: application/pdf<br>File-Size: 107<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/18<br>Title: Non cooperative household demand<br>Author-Name: Val&eacute;rie Lechene<br>Author-X-Name-First: Val&eacute;rie<br>Author-X-Name-Last: Lechene<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Ian Preston<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Preston<br>Author-Email: i.preston@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 201009<br>Length: <br>Number: W10/18<br>Abstract: &lt;p&gt;We study non cooperative household models with two agents and several voluntarily contributed public goods, deriving the counterpart to the Slutsky matrix and demonstrating the nature of the deviation of its properties from those of a true Slutsky matrix in the unitary model. We provide results characterising both cases in which there are and are not jointly contributed public goods. Demand properties are contrasted with those for collective models and conclusions drawn regarding the possibility of empirically testing the collective model against non cooperative alternatives and the non cooperative model against a general alternative.&lt;/p&gt;<br>Classification-JEL: D11, C72<br>Keywords: Nash equilibrium, Intra-household allocation, Slutsky symmetry.<br>File-URL:http://www.ifs.org.uk/wps/wp1018.pdf<br>File-Format: application/pdf<br>File-Size: 90<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/17<br>Title: Conditional cash transfers, women and the demand for food<br>Author-Name: Orazio Attanasio<br>Author-X-Name-First: Orazio<br>Author-X-Name-Last: Attanasio<br>Author-Email: o.attanasio@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Val&eacute;rie Lechene<br>Author-X-Name-First: Val&eacute;rie<br>Author-X-Name-Last: Lechene<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 201009<br>Length: <br>Number: W10/17<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;We examine the effect of large cash transfers on the consumption of food by poor households in rural Mexico. The transfers represent 20% of household income on average, and yet, the budget share of food is unchanged following receipt of this money. This is an important puzzle to solve, particularly so in the context of a social welfare programme designed in part to improve nutrition of individuals in the poorest households. We estimate an Engel curve for food. We rule out price increases, changes in the quality of food consumed and homotheticity of preferences as explanations for this puzzle. We also show that food is a necessity, with a strong negative effect of income on the food budget share. The decrease in food budget share caused by the large increase in income is cancelled by some other relevant aspect of the programme so that the net effect is nil. We argue that the program has not changed preferences and that there is no labelling of money. We propose that the key to the puzzle resides in the fact that the transfer is put in the hands of women and that the change in control over household resources is what leads to the observed changes in behaviour.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Keywords: Demand, conditional cash transfer, Engel curves, income elasticities, QUAIDS, food, nutrition.<br>File-URL:http://www.ifs.org.uk/wps/wp1017.pdf<br>File-Format: application/pdf<br>File-Size: 96<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/16<br>Title: Explaining the socio-economic gradient in child outcomes:  the intergenerational transmission of cognitive skills<br>Author-Name: Claire Crawford<br>Author-X-Name-First: Claire<br>Author-X-Name-Last: Crawford<br>Author-Email: c.crawford@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Alissa Goodman<br>Author-X-Name-First: Alissa<br>Author-X-Name-Last: Goodman<br>Author-Email: a.goodman@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Robert Joyce<br>Author-X-Name-First: Robert<br>Author-X-Name-Last: Joyce<br>Author-Email: robert_j@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201009<br>Length: <br>Number: W10/16<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;Papers in this volume and elsewhere consistently find a strong relationship between children's cognitive abilities and their parents' socio-economic position (SEP). Most studies seeking to explain the paths through which SEP affects cognitive skills suffer from a potentially serious omitted variables problem, as they are unable to account for an important determinant of children's cognitive abilities, namely parental cognitive ability. A range of econometric strategies have been employed to overcome this issue, but in this paper, we adopt the very simple (but rarely available) route of using data that includes a range of typically unobserved characteristics, such as parental cognitive ability and social skills. In line with previous work on the intergenerational transmission of cognitive skills, we find that parental cognitive ability is a significant predictor of children's cognitive ability; moreover, it explains one sixth of the socio-economic gap in those skills, even after controlling for a rich set of demographic, attitudinal and behavioural factors. Despite the importance of parental cognitive ability in explaining children's cognitive ability, however, the addition of such typically unobserved characteristics does not alter our impression of the relative importance of other factors in explaining the socio-economic gap in cognitive skills. This is reassuring for studies that are unable to control for parental cognitive ability.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1016.pdf<br>File-Format: application/pdf<br>File-Size: 1000<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/15<br>Title: The role of attitudes and behaviours in explaining socio-economic differences in attainment at age 16<br>Author-Name: Haroon Chowdry<br>Author-X-Name-First: Haroon<br>Author-X-Name-Last: Chowdry<br>Author-Email: haroon_c@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Claire Crawford<br>Author-X-Name-First: Claire<br>Author-X-Name-Last: Crawford<br>Author-Email: c.crawford@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Alissa Goodman<br>Author-X-Name-First: Alissa<br>Author-X-Name-Last: Goodman<br>Author-Email: a.goodman@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201009<br>Length: <br>Number: W10/15<br>Abstract: &lt;p&gt;It is well known that children growing up in poor families leave school with considerably lower qualifications than children from better off backgrounds. Using a simple decomposition analysis, we show that around two thirds of the socio-economic gap in attainment at age 16 can be accounted for by long-run family background characteristics and prior ability, suggesting that circumstances and investments made considerably earlier in the child's life explain the majority of the gap in test scores between young people from rich and poor families. However, we also find that differences in the attitudes and behaviours of young people and their parents during the teenage years play a key role in explaining the rich-poor gap in GCSE attainment: together, they explain a further quarter of the gap at age 16, and the majority of the small increase in this gap between ages 11 and 16. On this basis, our results suggest that while the most effective policies in terms of raising the attainment of young people from poor families are likely to be those enacted before children reach secondary school, policies that aim to reduce differences in attitudes and behaviours between the poorest children and those from better-off backgrounds during the teenage years may also make a significant contribution towards lowering the gap in achievement between young people from the richest and poorest families at age 16.&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1015.pdf<br>File-Format: application/pdf<br>File-Size: 916<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/14<br>Title: Education choices in Mexico: using a structural model and a randomized experiment to evaluate Progresa<br>Author-Name: Orazio Attanasio<br>Author-X-Name-First: Orazio<br>Author-X-Name-Last: Attanasio<br>Author-Email: o.attanasio@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name: Ana Santiago<br>Author-X-Name-First: Ana<br>Author-X-Name-Last: Santiago<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Inter-American Development Bank<br>Creation-Date: 201009<br>Length: <br>Number: W10/14<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;In this paper we use an economic model to analyse data from a major social experiment, namely PROGRESA in Mexico, and to evaluate its impact on school participation. In the process we also show the usefulness of using experimental data to estimate a structural economic model. The evaluation sample includes data from villages where the program was implemented and where it was not. The allocation was randomised for evaluation purposes. We estimate a structural model of education choices and argue that without such a framework it is impossible to evaluate the effect of the program and, especially, possible changes to its structure. We also argue that the randomized component of the data allows us to identify a more flexible model that is better suited to evaluate the program. We find that the program has a positive effect on the enrollment of children, especially after primary school; this result is well replicated by the parsimonious structural model. We also find that a revenue neutral change in the program that would increase the grant for secondary school children while eliminating for the primary school children would have a substantially larger effect on enrollment of the latter, while having minor effects on the former.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1014.pdf<br>File-Format: application/pdf<br>File-Size: 365<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/13<br>Title: Career progression and formal versus on-the-job training<br>Author-Name: Jerome Adda<br>Author-X-Name-First: Jerome<br>Author-X-Name-Last: Adda<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and European University Institute<br>Author-Name: Christian Dustmann<br>Author-X-Name-First: Christian<br>Author-X-Name-Last: Dustmann<br>Author-Email: c.dustmann@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name: Jean-Marc Robin<br>Author-X-Name-First: Jean-Marc<br>Author-X-Name-Last: Robin<br>Author-Email: jmrobin@univ-paris1.fr<br>Author-Workplace-Name: Institute for Fiscal Studies and EUREQua, University of Paris 1<br>Creation-Date: 201009<br>Length: <br>Number: W10/13<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;We evaluate the German apprenticeship system, which combines on-the-job training with classroom teaching, by modelling individual careers from the choice to join such a scheme and followed by their employment, job to job transitions and wages over the lifecycle. Our data is drawn from administrative records that report accurately job transitions and pay. We find that apprenticeships increase wages, and change wage profiles with more growth upfront, while wages in the non-apprenticeship sector grow at a lower rate but for longer. Non-apprentices face a much higher variance to the shocks of their match specific effects and a substantially larger variance in initial level of the offered wages. We find no evidence that qualified apprentices are harder to reallocate following job loss. The average life-cycle return to an apprenticeship career is about 14% and the return is mainly driven by the differences in the wage profile.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Keywords: Apprenticeship Training, Job Mobility, Labour Supply, Wages, Wage Determination, Matching, Wage Growth, Dynamic Discrete Choice, In-work Benefits, EITC, Education<br>File-URL:http://www.ifs.org.uk/wps/wp1013.pdf<br>File-Format: application/pdf<br>File-Size: 380<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/12<br>Title: Money, mentoring and making friends: the impact of a multidimensional access program on student performance<br>Author-Name: Kevin Denny<br>Author-X-Name-First: Kevin<br>Author-X-Name-Last: Denny<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College Dublin<br>Author-Name:  Orla Doyle<br>Author-X-Name-First: Orla<br>Author-X-Name-Last:  Doyle<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Patricia O'Reilly<br>Author-X-Name-First: Patricia<br>Author-X-Name-Last:  O'Reilly<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Vincent O'Sullivan<br>Author-X-Name-First: Vincent<br>Author-X-Name-Last:  O'Sullivan<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 201005<br>Length: <br>Number: W10/12<br>Abstract: &lt;p&gt;&lt;p&gt;There is a well established socioeconomic gradient in educational attainment in all countries: young people from a low socioeconomic status (SES) will, on average, receive less education and do less well at school. While this is true virtually everywhere, this SES gradient is noticeably higher in Ireland compared to other OECD countries despite much effort in recent decades to address this inequality. This study evaluates a university access program in Ireland that provides financial, academic and social support to low SES students both prior to and after entry to university. It uses a natural experiment involving the gradual roll-out of the program to identify the effect of the program. The program has parallels with US Affirmative Action programs, although preferential treatment in this case is based on SES rather than ethnicity. Evaluating the effectiveness of programs targeting disadvantaged students in Ireland is particularly salient given the high rate of return to education and the lack of intergenerational mobility in educational attainment. Overall, we find positive treatment effects on first year exam performance, progression to second year and final year graduation rates, with the impact often stronger for higher ability students. We find similar patterns of results for students that entered through the regular system and the 'affirmative action' group i.e. the students that entering with lower high school grades. The program affects both male and female students, albeit in different ways. The study is unable to identify which specific component of the treatment is responsible for the effects but we find no evidence that changes in the financial support have an effect on student outcomes. This study suggests that access programs can be an effective means of improving academic outcomes for socio-economically disadvantaged students.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: I21<br>Keywords: Education inequality, Access programs, Natural experiment, Economics of education<br>File-URL:http://www.ifs.org.uk/wps/wp1012.pdf<br>File-Format: application/pdf<br>File-Size: 423<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/11<br>Title: Disability risk, disability insurance and life cycle behavior<br>Author-Name: Hamish Low<br>Author-X-Name-First: Hamish<br>Author-X-Name-Last: Low<br>Author-Email: Hamish.Low@econ.cam.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Trinity College, Cambridge<br>Author-Name: Luigi Pistaferri<br>Author-X-Name-First: Luigi<br>Author-X-Name-Last: Pistaferri<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Stanford University<br>Creation-Date: 201005<br>Length: <br>Number: W10/11<br>Abstract: <p>The Disability Insurance (DI) program in the US is a large social insurance program that offers income replacement benefits to people with work limiting disabilities. The proportion of DI claimants in the US is now almost 5% of the working-age population and the cost is three times that of unemployment insurance. The key questions in thinking about the size and growth of the DI program are whether program claimants are genuinely unable to work, and how valuable is the insurance provided.</p><p>This paper has three aims:</p><ol><li>We provide a framework for weighing up the insurance value of disability benefi…ts against the incentive cost of inducing healthy individuals to stop work at different points of their life-cycle.<li>We estimate the risks to health that may lead to work-limiting disabilities and the risk to wages that may lead to individuals choosing not to work. We also estimate the extent of false awards made through the DI program alongside the proportion of awards to those in genuine need.<li>We use our model and estimates to characterize the economic effects of the disability insurance and to consider how policy reforms would affect behaviour and standard measures of household welfare.</ol><p>We differentiate disability status by its severity, and show that a severe disability shock leads to a decline in wages of 40%, as well as a substantial rise in the fixed cost of going to work. In terms of the effectiveness of the DI program, we estimate high levels of rejections of genuine applicants. In our counterfactual simulations, this means that household welfare increases as the program becomes less strict, despite the worsening incentives for false applications that this implies. On the other hand, incentives for false applications are reduced by reducing generosity and increasing reassessments, and these policies increase household welfare, despite the worse insurance implied.</p><br>Classification-JEL: D91, H53, H55, J26<br>Keywords: Disability, social security, savings behavior, wage risk<br>File-URL:http://www.ifs.org.uk/wps/wp1011.pdf<br>File-Format: application/pdf<br>File-Size: 1386<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/10<br>Title: Econometric methods for research in education<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name:  Steven Rivkin<br>Author-X-Name-First: Steven<br>Author-X-Name-Last:  Rivkin<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 201005<br>Length: <br>Number: W10/10<br>Abstract: &lt;p&gt;This paper reviews some of the econometric methods that have been used in the economics of education. The focus is on understanding how the assumptions made to justify and implement such methods relate to the underlying economic model and the interpretation of the results. We start by considering the estimation of the returns to education both within the context of a dynamic discrete choice model inspired byWillis and Rosen (1979) and in the context of the Mincer model. We discuss the relationship between the econometric assumptions and economic behaviour. We then discuss methods that have been used in the context of assessing the impact of education quality, the teacher contribution to pupils' achievement and the effect of school quality on housing prices. In the process we also provide a summary of some of the main results in this literature.&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1010.pdf<br>File-Format: application/pdf<br>File-Size: 749<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/09<br>Title: Minimum wage setting and standards of fairness<br>Author-Name:  David A. Green<br>Author-X-Name-First: David<br>Author-X-Name-Last:  Green<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Kathryn Harrison<br>Author-X-Name-First: Kathryn<br>Author-X-Name-Last:  Harrison<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 201005<br>Length: <br>Number: W10/09<br>Abstract: &lt;p&gt;We examine the setting of minimum wages, arguing that they can best be understood as a reflection of voters' notions of fairness. We arrive at this conclusion through an empirical investigation of the implications of three models, considered in the context of policy setting by sub-units in a federation: a competing interests group model; a constrained altruism model; and a fairness based model. In the latter model, voters are interested in banning what they view to be unfair transactions, with the notion of fairness based on comparisons to the &quot;going&quot; unskilled wage. We use data on minimum wages set in the ten Canadian provinces from 1969 to 2005 to carry out the investigation. A key implication of the models that is borne out in the data is that minimum wages should be set as a positive function of the location of the unskilled wage distribution. Together, the results indicate that minimum wages are set according to a &quot;fairness&quot; standard and that this may exacerbate movements in inequality.&lt;/p&gt;<br>Classification-JEL: J38, H73, D78<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1009.pdf<br>File-Format: application/pdf<br>File-Size: 815<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/08<br>Title: Did the extension of the franchise increase the Liberal vote in Victorian Britain? Evidence from the Second Reform Act<br>Author-Name: Samuel Berlinski<br>Author-X-Name-First: Samuel<br>Author-X-Name-Last: Berlinski<br>Author-Email: samuelb@iadb.org<br>Author-Workplace-Name: Institute for Fiscal Studies and University College, London<br>Author-Name:  Torun Dewan<br>Author-X-Name-First: Torun<br>Author-X-Name-Last:  Dewan<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 201005<br>Length: <br>Number: W10/08<br>Abstract: &lt;p&gt;We use evidence from the Second Reform Act, introduced in the United Kingdom in 1867, to analyze the impact on electoral outcomes of extending the vote to the unskilled urban population. By exploiting the sharp change in the electorate caused by franchise extension, we separate the effect of reform from that of underlying constituency level traits correlated with the voting population. Although we find that the franchise affected electoral competition and candidate selection, there is no evidence that relates Liberal electoral support to changes in the franchise rules. Our results are robust to various sources of endogeneity.&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1008.pdf<br>File-Format: application/pdf<br>File-Size: 352<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/07<br>Title: The price elasticity of charitable giving:  does the form of tax relief matter?<br>Author-Name: Kim Scharf<br>Author-X-Name-First: Kim<br>Author-X-Name-Last: Scharf<br>Author-Email: K.Scharf@warwick.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Warwick<br>Author-Name: Sarah Smith<br>Author-X-Name-First: Sarah<br>Author-X-Name-Last: Smith<br>Author-Email: sarah.smith@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Centre for Market and Public Organisation<br>Creation-Date: 201005<br>Length: <br>Number: W10/07<br>Abstract: &lt;p&gt;This paper uses a survey-based approach to test alternative methods of channeling tax relief to donors - as a tax rebate for the donor or as a matched payment to the receiving charity. On accounting grounds these two are equivalent but, in line with earlier experimental studies, we find that gross donations are significantly more responsive to a match change than to a rebate change. We show that the difference can largely be explained by the fact that a majority of donors do not adjust their nominal donations in response to a change in subsidy. This evidence adds to the growing empirical literature suggesting that consumers may not react to tax changes. In the case of tax subsidies for donations, this has implications for policy design - we show for the UK that a match-based system is likely to be more effective at increasing money going to charities. &lt;/p&gt;<br>Classification-JEL: C99, D12, D64, H24, H31, H41<br>Keywords: Charitable giving, tax subsidies, private provision of public goods <br>File-URL:http://www.ifs.org.uk/wps/wp1007.pdf<br>File-Format: application/pdf<br>File-Size: 266<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/06<br>Title: When you are born matters: the impact of date of birth on educational outcomes in England<br>Author-Name: Claire Crawford<br>Author-X-Name-First: Claire<br>Author-X-Name-Last: Crawford<br>Author-Email: c.crawford@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Lorraine Dearden<br>Author-X-Name-First: Lorraine<br>Author-X-Name-Last: Dearden<br>Author-Email: l.dearden@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Creation-Date: 201005<br>Length: <br>Number: W10/06<br>Abstract: &lt;p&gt;This paper examines the impact of month of birth on national achievement test scores in England whilst children are in school, and on subsequent further and higher education participation. Using geographical variation in school admissions policies, we are able to split this difference into an age of starting school or length of schooling effect, and an age of sitting the test effect. We find that the month in which you are born matters for test scores at ages 7, 11, 14 and 16, with younger children performing significantly worse, on average, than their older peers. Furthermore, almost all of this difference is due to the fact that younger children sit exams up to one year earlier than older cohort members. The difference in test scores at age 16 potentially affects the number of pupils who stay on beyond compulsory schooling, with predictable labour market consequences. Indeed, we find that the impact of month of birth persists into higher education (college) decisions, with age 19/20 participation declining monotonically with month of birth. The fact that being young in your school year affects outcomes after the completion of compulsory schooling points to the need for urgent policy reform, to ensure that future cohorts of children are not adversely affected by the month of birth lottery inherent in the English education system.&lt;/p&gt;<br>Classification-JEL: I21, I28<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1006.pdf<br>File-Format: application/pdf<br>File-Size: 690<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/05<br>Title: Earnings, consumption and lifecycle choices<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name: Luigi Pistaferri<br>Author-X-Name-First: Luigi<br>Author-X-Name-Last: Pistaferri<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Stanford University<br>Creation-Date: 201004<br>Length: <br>Number: W10/05<br>Abstract: &lt;p&gt;&lt;p&gt;We discuss recent developments in the literature that studies how the dynamics of earnings and wages affect consumption choices over the life cycle. We start by analyzing the theoretical impact of income changes on consumption - highlighting the role of persistence, information, size and insurability of changes in economic resources. We next examine the empirical contributions, distinguishing between papers that use only income data and those that use both income and consumption data. The latter do this for two purposes. First, one can make explicit assumptions about the structure of credit and insurance markets and identify the income process or the information set of the individuals. Second, one can assume that the income process or the amount of information that consumers have are known and tests the implications of the theory. In general there is an identification issue that is only recently being addressed, with better data or better &quot;experiments&quot;. We conclude with a discussion of the literature that endogenize people's earnings and therefore change the nature of risk faced by households.&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1005.pdf<br>File-Format: application/pdf<br>File-Size: 688<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/04<br>Title: Widening participation in higher education: analysis using linked administrative data <br>Author-Name: Haroon Chowdry<br>Author-X-Name-First: Haroon<br>Author-X-Name-Last: Chowdry<br>Author-Email: haroon_c@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Claire Crawford<br>Author-X-Name-First: Claire<br>Author-X-Name-Last: Crawford<br>Author-Email: c.crawford@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Lorraine Dearden<br>Author-X-Name-First: Lorraine<br>Author-X-Name-Last: Dearden<br>Author-Email: l.dearden@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London<br>Author-Name: Alissa Goodman<br>Author-X-Name-First: Alissa<br>Author-X-Name-Last: Goodman<br>Author-Email: a.goodman@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Anna Vignoles<br>Author-X-Name-First: Anna<br>Author-X-Name-Last: Vignoles<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Institute of Education<br>Creation-Date: 201005<br>Length: <br>Number: W10/04<br>Abstract: &lt;p&gt;&lt;p&gt;This paper makes use of newly linked administrative data to better understand the determinants of higher education participation amongst individuals from socio-economically disadvantaged backgrounds. It is unique in being able to follow two cohorts of students in England - those who took GCSEs in 2001-02 and 2002-03 - from age 11 to age 20. The findings suggest that while there remain large raw gaps in HE participation (and participation at high-status universities) by socio-economic status, these differences are substantially reduced once controls for prior attainment are included. Moreover, these findings hold for both state and private school students. This suggests that poor attainment in secondary schools is more important in explaining lower HE participation rates amongst students from disadvantaged backgrounds than barriers arising at the point of entry into HE. These findings highlight the need for earlier policy intervention to raise HE participation rates amongst disadvantaged youth.&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1004.pdf<br>File-Format: application/pdf<br>File-Size: 385<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/03<br>Title: Occupational pension value in the public and private sectors<br>Author-Name: Rowena Crawford<br>Author-X-Name-First: Rowena<br>Author-X-Name-Last: Crawford<br>Author-Email: rowena_c@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Gemma Tetlow<br>Author-X-Name-First: Gemma<br>Author-X-Name-Last: Tetlow<br>Author-Email: g.tetlow@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201004<br>Length: <br>Number: W10/03<br>Abstract: &lt;p&gt;&lt;p&gt;It is well known that in the UK defined benefit pensions are more prevalent in the public sector than in the private sector. Furthermore, we find that the average value of accrual to members of both defined benefit pensions and defined contribution pensions is lower in the private sector than in the public sector. As a result of both these factors, we find that the average value of pension accrual is much higher in the public sector than in the private sector. Due to the long-running shift away from defined benefit pensions to less generous workplace defined contribution pensions in the private sector continuing between 2001 and 2005 the difference in average pension accrual between the sectors increased over this period. While on average over this period earnings in the public sector grew 3.5% faster than in the private sector, including pension accrual increases this difference by one-third to 4.7%. We simulate a plausible reform to the public sector defined benefit pensions - an increase in the normal pension age from 60 to 65 for future pension accrual of all current members. We find that, had this reform been implemented between 2001 and 2005, average growth in total remuneration over this period in the public sector would actually have been almost the same as that in the private sector. &lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1003.pdf<br>File-Format: application/pdf<br>File-Size: 2060<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/02<br>Title: Releasing jobs for the young? Early retirement and youth unemployment in the United Kingdom<br>Author-Name: James Banks<br>Author-X-Name-First: James<br>Author-X-Name-Last: Banks<br>Author-Email: j.banks@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Antoine Bozio<br>Author-X-Name-First: Antoine<br>Author-X-Name-Last: Bozio<br>Author-Email: antoine_b@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 201003<br>Length: <br>Number: W10/02<br>Abstract: &lt;p&gt;This paper tries to assess whether or not we have any empirical evidence of links between early retirement and youth unemployment. Most economists would today dismiss the idea immediately as another version of the na&amp;iuml;ve 'lump-of-labor fallacy'.  In its most basic form, this proposition holds that there is a fixed supply of jobs and that any reduction in labor supply will reduce unemployment by offering jobs to those who are looking for ones. Taken to the extreme, this view would support that the idea that a high level of employment of one group of individuals can only be at the expense of another group: if for instance were the population of a country to increase, younger individuals would be unemployed as older individuals would not 'release' enough jobs for the new entrants. The absurdity of this view in the long term is simply seen by considering the fact that the size of a country does not bear any relation to the share of population unemployed. &lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1002.pdf<br>File-Format: application/pdf<br>File-Size: 414<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:10/01<br>Title: Employment protection legislation, multinational firms and innovation<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Gareth Macartney<br>Author-X-Name-First: Gareth<br>Author-X-Name-Last: Macartney<br>Author-Email: gareth_m@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 201001<br>Length: <br>Number: W10/01<br>Abstract: &lt;p&gt;The theoretical effects of labour regulations such as employment protection legislation (EPL) on innovation is ambiguous, and empirical evidence has thus far been inconclusive. EPL increases job security and the greater enforceability of job contracts may increase worker investment in innovative activity. On the other hand EPL increases adjustment costs faced by firms, and this may lead to under-investment in activities that are likely to require adjustment, including technologically advanced innovation. In this paper we find empirical evidence that both effects are at work - multinational enterprises locate more innovative activity in countries with high EPL, however they locate more technologically advanced innovation in countries with low EPL.&lt;/p&gt;<br>Classification-JEL: D21, F23, O31, J24<br>Keywords: Innovation, employment protection, multinational firm location<br>File-URL:http://www.ifs.org.uk/wps/wp1001.pdf<br>File-Format: application/pdf<br>File-Size: 239<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/23<br>Title: Taxation of human capital and wage inequality: a cross-country analysis<br>Author-Name: Fatih Guvenen<br>Author-X-Name-First: Fatih<br>Author-X-Name-Last: Guvenen<br>Author-Email: guvenen@umn.edu<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Rochester<br>Author-Name:  Burhanettin Kuruscu<br>Author-X-Name-First: Burhanettin<br>Author-X-Name-Last:  Kuruscu<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Serdar Ozkan<br>Author-X-Name-First: Serdar<br>Author-X-Name-Last:  Ozkan<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200911<br>Length: <br>Number: W09/23<br>Abstract: &lt;p&gt;Wage inequality has been significantly higher in the United States than in continental European countries (CEU) since the 1970s. Moreover, this inequality gap has further widened during this period as the US has experienced a large increase in wage inequality, whereas the CEU has seen only modest changes. This paper studies the role of labor income tax policies for understanding these facts. We begin by documenting two new empirical facts that link these inequality differences to tax policies. First, we show that countries with more progressive labor income tax schedules have significantly lower before-tax wage inequality at different points in time. Second, progressivity is also negatively correlated with the rise in wage inequality during this period. We then construct a life cycle model in which individuals decide each period whether to go to school, work, or be unemployed. Individuals can accumulate skills either in school or while working. Wage inequality arises from differences across individuals in their ability to learn new skills as well as from idiosyncratic shocks. Progressive taxation compresses the (after-tax) wage structure, thereby distorting the incentives to accumulate human capital, in turn reducing the cross-sectional dispersion of (before-tax) wages. We find that these policies can account for half of the difference between the US and the CEU in overall wage inequality and 76% of the difference in inequality at the upper end (log 90-50 differential). When this economy experiences skill-biased technological change, progressivity also dampens the rise in wage dispersion over time. The model explains 41% of the difference in the total rise in inequality and 58% of the difference at the upper end.&lt;/p&gt;<br>Keywords: Wage inequality, human capital, skill-biased technical change, tax policies<br>File-URL:http://www.ifs.org.uk/wps/wp0923.pdf<br>File-Format: application/pdf<br>File-Size: 1038<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/22<br>Title: Understanding the wage patterns of Canadian less skilled workers: the role of implicit contracts<br>Author-Name:  David A. Green<br>Author-X-Name-First: David<br>Author-X-Name-Last:  Green<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  James Townsend<br>Author-X-Name-First: James<br>Author-X-Name-Last:  Townsend<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200911<br>Length: <br>Number: W09/22<br>Abstract: &lt;p&gt;&lt;p&gt;We examine the wage patterns of Canadian less skilled male workers over the last quarter century by organizing workers into job entry cohorts. We find entry wages for successive cohorts declined until 1997, and then began to recover. Wage profiles steepened for cohorts entering after 1997, but not for cohorts entering in the 1980s - a period when start wages were relatively high. We argue that these patterns are consistent with a model of implicit contracts with recontracting in which a worker's current wage is determined by the best labour market conditions experienced during the current job spell.&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: J31, O33<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0922.pdf<br>File-Format: application/pdf<br>File-Size: 468<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/21<br>Title: Ability, parental valuation of education and the high school dropout decision<br>Author-Name:  Kelly Foley<br>Author-X-Name-First: Kelly<br>Author-X-Name-Last:  Foley<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Giovanni Gallipoli<br>Author-X-Name-First: Giovanni<br>Author-X-Name-Last: Gallipoli<br>Author-Email: gallipol@interchange.ubc.ca<br>Author-Workplace-Name: Institute for Fiscal Studies and University of British Columbia<br>Author-Name:  David A. Green<br>Author-X-Name-First: David<br>Author-X-Name-Last:  Green<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200911<br>Length: <br>Number: W09/21<br>Abstract: &lt;p&gt;We use a large, rich Canadian micro-level dataset to examine the channels through which family socio-economic status and unobservable characteristics affect children's decisions to drop out of high school. First, we document the strength of observable socio-economic factors: our data suggest that teenage boys with two parents who are themselves high school dropouts have a 16 per cent chance of dropping out, compared to a dropout rate of less than 1 per cent for boys whose parents both have a university degree. We examine the channels through which this socio-economic gradient arises using an extended version of the factor model set out in Carneiro, Hansen, and Heckman (2003). Specifically, we consider the impact of cognitive and non-cognitive ability and the value that parents place on education. Our results support three main conclusions. First, cognitive ability at age 15 has a substantial impact on dropping out. The highest ability individuals are predicted never to drop out regardless of parental education or parental valuation of education. In contrast, the lowest ability teenagers have a probability of dropping out of approximately .36 if their parents have a low valuation of education. Second, parental valuation of education has a substantial impact on medium and low ability teenagers. A low ability teenager has a probability of dropping out of approximately .03 if his parents place a high value on education but .36 if their educational valuation is low. These effects are estimated while conditioning on ability at age 15. Thus, under some assumptions, they reflect parental influences during the upper teenage years and are in addition to any impact they might have in the early childhood years leading up to age 15. Third, parental education has no direct effect on dropping out once we control for ability and parental valuation of education. Overall, our results point to the importance of whatever determines ability at age 15 (including, potentially, early childhood interventions) and of parental valuation of education during the teenage years. Our work also provides a small methodological contribution by extending the standard factor based estimator to allow a more non-linear relationship between the factors and a co-variate of interest. We show that allowing for non-linearities has a substantial impact on estimated effects.&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0921.pdf<br>File-Format: application/pdf<br>File-Size: 558<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/20<br>Title: Peace and goodwill? Using an experimental game to analyse the Desarrollo y Paz initiative in Colombia<br>Author-Name: Orazio Attanasio<br>Author-X-Name-First: Orazio<br>Author-X-Name-Last: Attanasio<br>Author-Email: o.attanasio@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Luca  Pellerano<br>Author-X-Name-First: Luca <br>Author-X-Name-Last: Pellerano<br>Author-Email: luca_p@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: David Phillips<br>Author-X-Name-First: David<br>Author-X-Name-Last: Phillips<br>Author-Email: david_p@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200910<br>Length: <br>Number: W09/20<br>Abstract: &lt;p&gt;&lt;p&gt;Several decades of conflict, rebellion and unrest severely weakened civil society in parts of Colombia. Desarollo y Paz is the umbrella term used to describe the set of locally-led initiatives that aim at addressing this problem through initiatives to promote sustainable economic development and community cohesion and action.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;In this paper we analyse the findings from a series of 'public good' games that were conducted between November 2005 and February 2007 in 104 municipalities in rural and urban Colombia with mainly poor participants. The data covers municipalities both with ('treatment') and without ('control') a PRDP in place, and within the 'treatment' municipalities, both beneficiaries and non beneficiaries of the PRDP initiative. The data for 'control' municipalities was collected as part of the evaluation of Familias en Accion (FeA), Colombia's conditional cash transfer programme. &lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;The game is structured as a typical free-rider problem with the act of contributing to the 'public good' (a collective money pot) being always dominated by non-contribution. We interpret contribution as an act consistent with a high degree of social capital. &lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;Potentially endogenous selection into the programme makes identifying programme effects difficult but we find strong and suggestive evidence that exposure to PRDPs improve social capital and that this extends beyond direct beneficiaries of the programme. In particular, the duration of programme operation and the proportion of programme beneficiaries in a game session increase contribution to the public good, suggesting that in order to have a major impact the programme must be sufficiently 'intensive'.&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: C93, I38, D74, H41<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0920.pdf<br>File-Format: application/pdf<br>File-Size: 1563<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/19<br>Title: Migration, violence and welfare programmes in rural Colombia<br>Author-Name: Alice Mesnard<br>Author-X-Name-First: Alice<br>Author-X-Name-Last: Mesnard<br>Author-Email: a.mesnard@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200909<br>Length: <br>Number: W09/19<br>Abstract: &lt;p&gt;This paper studies migration decisions of very poor households in an environment with a high level of violence. By matching detailed retrospective data on violence levels in Colombian rural municipalities with a household survey collected for the evaluation of the &quot;Familias en Acci&oacute;n&quot; welfare programme, the empirical analysis takes into account possible selection problems of the sample and the key issue of endogeneity of violence. The main results show that high levels of violence encourage households to leave their municipality of residence but that welfare programmes may mitigate these flows, provided that the incidence of violence is not unduly high. This is consistent with the fact that the households under study are liquidity constrained: when violence is high, cash transfers may enable them to leave their municipality of residence, whereas, in more normal circumstances, receiving cash transfers increases the benefits to stay where they are registered. Further evidence using household shocks and wealth confirm that liquidity constraints play a large role in explaining such heterogeneous impacts of the programme along violence levels. Other important determinants of migration are the type of property rights and the health insurance rural households can benefit from.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Keywords: migration, welfare programme, violence, displacement, Colombia<br>File-URL:http://www.ifs.org.uk/wps/wp0919.pdf<br>File-Format: application/pdf<br>File-Size: 313<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/18<br>Title: Estimating the peace dividend: the impact of violence on house prices in Northern Ireland<br>Author-Name: Tim Besley<br>Author-X-Name-First: Tim<br>Author-X-Name-Last: Besley<br>Author-Email: t.besley@lse.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and London School of Economics<br>Author-Name:  Hannes Mueller<br>Author-X-Name-First: Hannes<br>Author-X-Name-Last:  Mueller<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200909<br>Length: <br>Number: W09/18<br>Abstract: &lt;p&gt;&lt;p&gt;This paper exploits data on the pattern of violence across regions and over time to estimate the impact of the peace process in Northern Ireland on house prices. We begin with a linear model that estimates the average treatment effect of a conflict-related killing on house prices .showing a negative correlation between house prices and killings. We then develop an approach based on an economic model where the parameters of the statistical process are estimated for a Markov switching model where conflict and peace are treated as a latent state. From this, we are able to construct a measure of the discounted number of killings which is updated in the light of actual killings. This model naturally suggests a heterogeneous effect of killings across space and time which we use to generate estimates of the peace dividend. The economic model suggests a somewhat different pattern of estimates to the linear model. We also show that there is some evidence of spillover effects of violence in adjacent regions.&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0918.pdf<br>File-Format: application/pdf<br>File-Size: 336<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/17<br>Title: The scourge of Asian Flu: in utero exposure to pandemic influenza and the development of a cohort of British children<br>Author-Name: Elaine Kelly<br>Author-X-Name-First: Elaine<br>Author-X-Name-Last: Kelly<br>Author-Email: elaine_k@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200909<br>Length: <br>Number: W09/17<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;This paper examines the impact of &lt;i&gt;in utero&lt;/i&gt; exposure to the Asian influenza pandemic of 1957 upon physical and cognitive development in childhood. Outcome data is provided by the National Child Development Study (NCDS), a panel study of a cohort of British children who were all potentially exposed in the womb. Epidemic effects are identified using geographic variation in a surrogate measure of the epidemic. Results indicate significant detrimental effects of the epidemic upon birth weight and height at 7 and 11, but only for the offspring of mother's with certain health characteristics. By contrast, the impact of the epidemic on childhood cognitive test scores is more general: test scores are reduced at the mean, and effects remain constant across maternal health and socioeconomic indicators. Taken together, our results point to multiple channels linking foetal health shocks to childhood outcomes.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: I12, I29, D13<br>Keywords: NCDS; foetal origins; birth weight; influenza<br>File-URL:http://www.ifs.org.uk/wps/wp0917.pdf<br>File-Format: application/pdf<br>File-Size: 966<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/16<br>Title: Externality-correcting taxes and regulation<br>Author-Name:  Vidar Christiansen<br>Author-X-Name-First: Vidar<br>Author-X-Name-Last:  Christiansen<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Stephen Smith<br>Author-X-Name-First: Stephen<br>Author-X-Name-Last: Smith<br>Author-Email: stephen.smith@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200909<br>Length: <br>Number: W09/16<br>Abstract: &lt;p&gt;Much of the literature on externalities has considered taxes and direct regulation as alternative policy instruments. Both instruments may in practice be imperfect, reflecting informational deficiencies and other limitations. We analyse the use of taxes and regulation in combination, to control externalities arising from individual consumption behaviour. We consider cases where taxes are either imperfectly differentiated to reflect individual differences in externalities, or where some consumption escapes taxation. In both cases we characterise the optimal instrument mix, and show how changing the level of direct regulation alters the optimal externality tax.&lt;/p&gt;<br>Classification-JEL: H21, H23<br>Keywords: externalities, Pigouvian taxes, regulations<br>File-URL:http://www.ifs.org.uk/wps/wp0916.pdf<br>File-Format: application/pdf<br>File-Size: 554<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/15<br>Title: Food and cash transfers: evidence from Colombia<br>Author-Name: Orazio Attanasio<br>Author-X-Name-First: Orazio<br>Author-X-Name-Last: Attanasio<br>Author-Email: o.attanasio@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Erich Battistin<br>Author-X-Name-First: Erich<br>Author-X-Name-Last: Battistin<br>Author-Email: e.battistin@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Alice Mesnard<br>Author-X-Name-First: Alice<br>Author-X-Name-Last: Mesnard<br>Author-Email: a.mesnard@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200907<br>Length: <br>Number: W09/15<br>Abstract: &lt;p&gt;We study food Engel curves among the poor population targeted by a conditional cash transfer programme in Colombia. After controlling for the endogeneity of total expenditure and for the (unobserved) variability of prices across villages, the best fit is provided by a log-linear specification. Our estimates imply that an increase in total expenditure by 10% would lead to a decrease of 1% in the share of food. However, quasi-experimental estimates of the impact of the programme on total and food consumption show that the share of food increases, suggesting that the programme has more complex impacts than increasing household income. In particular, our results are not inconsistent with the hypothesis that the programme, targeted to women, could increase their bargaining power and induce a more than proportional increase in food consumption.&lt;/p&gt;<br>Classification-JEL: C52, D12, I38<br>Keywords: Demand patterns, food Engel curves, evaluation of welfare programme<br>File-URL:http://www.ifs.org.uk/wps/wp0915.pdf<br>File-Format: application/pdf<br>File-Size: 779<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/14<br>Title: How does entry regulation influence entry into self-employment and occupational mobility?<br>Author-Name: Susanne Prantl<br>Author-X-Name-First: Susanne<br>Author-X-Name-Last: Prantl<br>Author-Email: prantl@mpg.coll.de<br>Author-Workplace-Name: Institute for Fiscal Studies and Max Plank Institute for Research on Collective Goods<br>Author-Name:  Alexandra Spitz-Oener<br>Author-X-Name-First: Alexandra<br>Author-X-Name-Last:  Spitz-Oener<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200907<br>Length: <br>Number: W09/14<br>Abstract: &lt;p&gt;&lt;p&gt;We analyze how an entry regulation that imposes a mandatory educational standard affects entry into self-employment and occupational mobility. We exploit the German reunification as a natural experiment and identify regulatory effects by comparing differences between regulated occupations and unregulated occupations in East Germany with the corresponding differences in West Germany after reunification. Consistent with our expectations, we find that entry regulation reduces entry into self-employment and occupational mobility after reunification more in regulated occupations in East Germany than in West Germany. Our findings are relevant for transition or emerging economies as well as for mature market economies requiring large structural changes after unforeseen economic shocks.&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: J24, J62, K20, L11, L51, M13<br>Keywords: Entry Regulation, Self-Employment, Occupational Mobility<br>File-URL:http://www.ifs.org.uk/wps/wp0914.pdf<br>File-Format: application/pdf<br>File-Size: 683<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/13<br>Title: Market regulation and firm performance: the case of smoking bans in the UK<br>Author-Name: Jerome Adda<br>Author-X-Name-First: Jerome<br>Author-X-Name-Last: Adda<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and European University Institute<br>Author-Name: Samuel Berlinski<br>Author-X-Name-First: Samuel<br>Author-X-Name-Last: Berlinski<br>Author-Email: samuelb@iadb.org<br>Author-Workplace-Name: Institute for Fiscal Studies and University College, London<br>Author-Name:  V. Bhaskar<br>Author-X-Name-First: V.<br>Author-X-Name-Last:  Bhaskar<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Steve Machin<br>Author-X-Name-First: Steve<br>Author-X-Name-Last: Machin<br>Author-Email: s.machin@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200907<br>Length: <br>Number: W09/13<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;&lt;p&gt;This paper analyzes the effects of a ban on smoking in public places upon firms and consumers. It presents a theoretical model and tests its predictions using unique data from before and after the introduction of smoking bans in the UK. Cigarette smoke is a public bad, and smokers and non-smokers differ in their valuation of smoke-free amenities. Consumer heterogeneity implies that the market equilibrium may result in too much uniformity, whereas social optimality requires a mix of smoking and non-smoking pubs (which can be operationalized via licensing). If the market equilibrium has almost all pubs permitting smoking (as is the case in the data) then a blanket ban reduces pub sales, profits, and consumer welfare. We collect survey data from public houses and find that the Scottish smoking ban (introduced in March 2006) reduced pub sales and harmed medium run profitability. An event study analysis of the stock market performance of pub-holding companies corroborates the negative effects of the smoking ban on firm performance.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: I18, H23, L51, L81<br>Keywords: Regulation; smoking ban; market provision of quality; sales; prices; profitability; stock market performance.<br>File-URL:http://www.ifs.org.uk/wps/wp0913.pdf<br>File-Format: application/pdf<br>File-Size: 645<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/12<br>Title: Negative marginal tax rates and heterogeneity<br>Author-Name:  Philippe Chon&eacute;<br>Author-X-Name-First: Philippe<br>Author-X-Name-Last:  Chon&eacute;<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Guy Laroque<br>Author-X-Name-First: Guy<br>Author-X-Name-Last: Laroque<br>Author-Email: laroque@ensae.fr<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200905<br>Length: <br>Number: W09/12<br>Abstract: &lt;p&gt;Heterogeneity is likely to be an important determinant of the shape of optimal tax schemes. This article addresses the issue in a model &amp;agrave; la Mirrlees with a continuum of agents. The agents differ in their productivities and opportunity costs of work, but their labor supplies depend only on a unidimensional combination of their two characteristics.  Conditions are given under which the standard result that marginal tax rates are everywhere non-negative holds. This is in particular the case when  work opportunity costs are distributed independently of productivities. But one can also get negative marginal tax rates: economies where negative tax rates are optimal at the bottom of the income distribution are studied, and a numerical illustration is given, based on UK data. &lt;/p&gt;<br>Classification-JEL: H21, H31<br>Keywords: Optimal taxation, heterogeneity, welfare.<br>File-URL:http://www.ifs.org.uk/wps/wp0912.pdf<br>File-Format: application/pdf<br>File-Size: 512<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/11<br>Title: New evidence on taxes and portfolio choice<br>Author-Name: Sule Alan<br>Author-X-Name-First: Sule<br>Author-X-Name-Last: Alan<br>Author-Email: salan@econ.yorku.ca<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Cambridge<br>Author-Name:  Kadir Atalay<br>Author-X-Name-First: Kadir<br>Author-X-Name-Last:  Atalay<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Thomas Crossley<br>Author-X-Name-First: Thomas<br>Author-X-Name-Last: Crossley<br>Author-Email:  tfc22@cam.ac.uk <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Cambridge<br>Author-Name:  Sung-Hee Jeon<br>Author-X-Name-First: Sung-Hee<br>Author-X-Name-Last:  Jeon<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200904<br>Length: <br>Number: W09/11<br>Abstract: &lt;p&gt;Identifying the effect of differential taxation on portfolio allocation requires exogenous variation in marginal tax rates. Marginal tax rates vary with income, but income surely affects portfolio choice directly. In systems of individual taxation - like Canada's - couples with the same household income can face different effective tax rates on capital income when labor income is distributed differently within households. Using this source of variation we find statistically significant but economically modest responses to taxation. In a 'placebo' test, using data from the U.S. (which has joint taxation), we find no effect of the intra-household distribution of labor income on portfolios. &lt;/p&gt;<br>Classification-JEL: G11, H24, H31<br>Keywords: Household portfolio choice, taxes<br>File-URL:http://www.ifs.org.uk/wps/wp0911.pdf<br>File-Format: application/pdf<br>File-Size: 103<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/10<br>Title: ICT, corporate restructuring and productivity<br>Author-Name: Laura Abramovsky<br>Author-X-Name-First: Laura<br>Author-X-Name-Last: Abramovsky<br>Author-Email: l.abramovsky@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Creation-Date: 200904<br>Length: <br>Number: W09/10<br>Abstract: &lt;p&gt;&lt;p&gt;Stronger productivity growth in the US than the EU over the late 1990s is widely attributed to faster, more widespread adoption of information and communication technology (ICT). The literature has emphasised complementarities in production between ICT and internal restructuring as an important mechanism. We investigate the idea that increased use of ICT has facilitated outsourcing of business services, and that these are complementary activities in production because they allow firms to focus on their core competencies. This is consistent with evidence from the business literature and aggregate trends, and we show evidence from microdata that is consistent with this idea. &lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: D2, O3, O4<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0910.pdf<br>File-Format: application/pdf<br>File-Size: 148<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/09<br>Title: An analysis of consumer panel data<br>Author-Name: Andrew Leicester<br>Author-X-Name-First: Andrew<br>Author-X-Name-Last: Leicester<br>Author-Email: a.leicester@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Zo&euml; Oldfield<br>Author-X-Name-First: Zo&euml;<br>Author-X-Name-Last: Oldfield<br>Author-Email: z.oldfield@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200904<br>Length: <br>Number: W09/09<br>Abstract: &lt;p&gt;&lt;p&gt;In terms of collecting comprehensive panel expenditure data, there are trade-offs to be made in terms of the demands imposed on respondents and the level of detail and spending coverage collected. Existing comprehensive spending data tends to be cross-sectional whilst panel studies include only limited expenditure questions that record spending only as broad aggregates. More recently, economists have begun to use spending information collected by market research companies that records very detailed spending down to the barcode level from a panel of households, usually recorded by in-home barcode scanners, which may provide considerable advantages over existing data more commonly used in social sciences. However, there has not been a comprehensive assessment of the strengths and weaknesses of this kind of data collection method and the potential implications of survey mode on the recorded data. &lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;This paper seeks to address this, by an in-depth examination of scanner data from one company, Taylor Nelson Sofres (TNS), on grocery purchases over a five-year period. We assess how far the ongoing demands of participation inherent in this kind of survey lead to 'fatigue' in respondents' recording of their spending and compare the demographic representativeness of the data to the well-established Expenditure and Food Survey (EFS), constructing weights for the TNS that account for observed demographic differences. We also look at demographic transitions, comparing the panel aspect of the TNS to the British Household Panel Study (BHPS). We examine in detail the expenditure data in the TNS and EFS surveys and discuss the implications of this method of data collection for survey attrition. Broadly, we suggest that problems of fatigue and attrition may not be so severe as may be expected, though there are some differences in expenditure levels (and to some extent patterns of spending) that cannot be attributed to demographic or time differences in the two surveys alone and may be suggestive of survey mode effects. Demographic transitions appear to occur less frequently than we might expect which may limit the usefulness of the panel aspect of the data for some applications.&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: C81, C83, C33, C41<br>Keywords: Household panel data, scanner data, expenditure, food, duration models, attrition<br>File-URL:http://www.ifs.org.uk/wps/wp0909.pdf<br>File-Format: application/pdf<br>File-Size: 874<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/08<br>Title: Why has home ownership fallen among the young?<br>Author-Name:  Jonas D. M. Fisher<br>Author-X-Name-First: Jonas<br>Author-X-Name-Last:  Fisher<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Martin Gervais<br>Author-X-Name-First: Martin<br>Author-X-Name-Last:  Gervais<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200903<br>Length: <br>Number: W09/08<br>Abstract: &lt;p&gt;&lt;p&gt;We document that home ownership of households with 'heads' aged 25-44 years fell substantially between 1980 and 2000 and recovered only partially during the 2001-2005 housing boom. The 1980-2000 decline in young home ownership occurred as improvements in mortgage opportunities made it easier to purchase a home. This paper uses an equilibrium life-cycle model calibrated to micro and macro evidence to understand why young home ownership fell over a period when it became easier to own a home. Our findings indicate that a trend toward marrying later and the increase in household earnings risk that occurred after 1980 account for 3/5 to 4/5 of the decline in young home ownership.&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: E0, E2, J1, R21<br>Keywords: Housing, home ownership, tenure choice, first-time home-buyers, marriage, income risk<br>File-URL:http://www.ifs.org.uk/wps/wp0908.pdf<br>File-Format: application/pdf<br>File-Size: 418<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/07<br>Title: The value of teachers' pensions<br>Author-Name: Richard Disney<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Disney<br>Author-Email: richard.disney@nottingham.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Nottingham<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Gemma Tetlow<br>Author-X-Name-First: Gemma<br>Author-X-Name-Last: Tetlow<br>Author-Email: g.tetlow@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200903<br>Length: <br>Number: W09/07<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;As private sector employers have moved away from providing final salary defined benefit (DB) pensions to their employees, attention has increasingly focused on the public sector's continued provision of such pensions and the value of these pension promises to public sector employees. The estimated underlying liabilities of such plans have increased sharply in recent years, at least in part due to unanticipated increases in longevity. This has led to reforms of all the major public sector pension schemes, the net result of which has been to reduce the level of benefits offered by the schemes (predominantly to new, rather than existing members).&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;This paper examines, in the context of the Teachers' Pension Scheme (TPS), how much the pension promises are worth and what effect the change in scheme rules has had on them. This paper also addresses a number of other issues that are important when valuing DB pension rights and their relation to overall remuneration. First, how increases in current pay feed through into pension values. Second, how the age profile of earnings affects the profile of pension accrual. Finally, how the value of pension rights in DB schemes compares to that in a stylised  defined contribution (DC) scheme.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;The figures presented in this paper relate specifically to the composition of members and the specific scheme rules of the TPS. However, the issues raised apply equally to other DB schemes, both public and private sector.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0907.pdf<br>File-Format: application/pdf<br>File-Size: 406<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/06<br>Title: Career progression and formal versus on-the-job training<br>Author-Name: Jerome Adda<br>Author-X-Name-First: Jerome<br>Author-X-Name-Last: Adda<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and European University Institute<br>Author-Name: Christian Dustmann<br>Author-X-Name-First: Christian<br>Author-X-Name-Last: Dustmann<br>Author-Email: c.dustmann@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name: Jean-Marc Robin<br>Author-X-Name-First: Jean-Marc<br>Author-X-Name-Last: Robin<br>Author-Email: jmrobin@univ-paris1.fr<br>Author-Workplace-Name: Institute for Fiscal Studies and EUREQua, University of Paris 1<br>Creation-Date: 200901<br>Length: <br>Number: W09/06<br>Abstract: &lt;p&gt;&lt;p&gt;We model the choice of individuals to follow or not apprenticeship training and their subsequent career. We use German administrative data, which records education, labour market transitions and wages to estimate a dynamic discrete choice&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;model of training choice, employment and wage growth. The model allows for returns to experience and tenure, match specific effects, job mobility and search frictions. We show how apprenticeship training affects labour market careers and we quantify its benefits, relative to the overall costs. We then use our model to show how two welfare reforms change life-cycle decisions and human capital accumulation: One is the introduction of an Earned Income Tax Credit in Germany, and the other is a reform to Unemployment Insurance. In both reforms we find very significant impacts of the policy on training choices and on the value of realized matches, demonstrating the importance of considering such longer term implications.&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0906.pdf<br>File-Format: application/pdf<br>File-Size: 440<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/05<br>Title: Preschool and maternal labour market outcomes: evidence from a regression discontinuity design<br>Author-Name: Samuel Berlinski<br>Author-X-Name-First: Samuel<br>Author-X-Name-Last: Berlinski<br>Author-Email: samuelb@iadb.org<br>Author-Workplace-Name: Institute for Fiscal Studies and University College, London<br>Author-Name:  Sebastian Galiani<br>Author-X-Name-First: Sebastian<br>Author-X-Name-Last:  Galiani<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Patrick J. McEwan<br>Author-X-Name-First: Patrick<br>Author-X-Name-Last:  McEwan<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200901<br>Length: <br>Number: W09/05<br>Abstract: &lt;p&gt;Expanding preschool education has the dual goals of improving child outcomes and work incentives for mothers. This paper provides evidence on the second, identifying the impact of preschool attendance on maternal labor market outcomes in Argentina. A major challenge in identifying the causal effect of preschool attendance on parental outcomes is non-random selection into early education. We address this by relying on plausibly exogenous variation in preschool attendance that is induced when children are born on either side of Argentina's enrollment cutoff date of July 1.  Because of enrollment cutoff dates, 4 year-olds born just before July 1 are 0.3 more likely to attend preschool.  Our regression-discontinuity estimates compare maternal employment outcomes of 4 year-old children on either side of this cutoff, identifying effects among the subset of complying households (who are perhaps more likely to face constraints on their level 2 preschool attendance). &lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;Our findings suggest that, on average, 13 mothers start to work for every 100 youngest children in the household that start preschool (though, in our preferred specification, this estimate is not statistically significant at conventional levels). Furthermore, mothers are 19.1 percentage points more likely to work for more than 20 hours a week (i.e., more time than their children spend in school) and they work, on average, 7.8 more hours per week as consequence of their youngest offspring attending preschool. We find no effect on maternal labor outcomes when a child that is not the youngest in the household attends preschool. Finally, we find that at the point of transition from kindergarten to primary school some employment effects persist.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;Our preferred estimates condition on mother's schooling and other exogenous covariates, given evidence that mothers' schooling is unbalanced in the vicinity of the July 1 cutoff in the sample of 4 year-olds.  Using a large set of natality records, we found no evidence that this is due to precise birth date manipulation by parents.  Other explanations, like sample selection, are also not fully consistent with the data, and we must remain agnostic on this point.  Despite this shortcoming, the credibility of the estimates is partly enhanced by the consistency of point estimates with Argentine research using a different EPH sample and sources of variation in preschool attendance (Berlinski and Galiani 2007).&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;A growing body of research suggests that pre-primary school can improve educational outcomes for children in the short and long run (Blau and Currie 2006; Schady 2006). This paper provides further evidence that, &lt;i&gt;ceteris paribus&lt;/i&gt;, an expansion in preschool education may enhance the employment prospects of mothers of children in preschool age.&lt;/p&gt;<br>Classification-JEL: I21, I28, J22<br>Keywords: Female labor supply, Argentina, regression-discontinuity, kindergarten.<br>File-URL:http://www.ifs.org.uk/wps/wp0905.pdf<br>File-Format: application/pdf<br>File-Size: 586<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/04<br>Title: Ethnic parity in labour market outcomes for benefit claimants<br>Author-Name: Claire Crawford<br>Author-X-Name-First: Claire<br>Author-X-Name-Last: Crawford<br>Author-Email: c.crawford@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Lorraine Dearden<br>Author-X-Name-First: Lorraine<br>Author-X-Name-Last: Dearden<br>Author-Email: l.dearden@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London<br>Author-Name: Alice Mesnard<br>Author-X-Name-First: Alice<br>Author-X-Name-Last: Mesnard<br>Author-Email: a.mesnard@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Jonathan Shaw<br>Author-X-Name-First: Jonathan<br>Author-X-Name-Last: Shaw<br>Author-Email: j.shaw@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Barbara Sianesi<br>Author-X-Name-First: Barbara<br>Author-X-Name-Last: Sianesi<br>Author-Email: b.sianesi@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200901<br>Length: <br>Number: W09/04<br>Abstract: &lt;p&gt;We use UK administrative data to estimate the differential in labour market outcomes between Ethnic Minority benefit claimants and otherwise identical Whites. In many cases, Minorities and Whites are simply too different for satisfactory estimates to be calculated and results are sensitive to the methodology used. This calls into question previous results based on simple regression techniques, which may hide the fact that observationally different ethnic groups are being compared by parametric extrapolation. For some groups, however, we could calculate satisfactory results. In these cases, large and significant raw penalties almost always disappear once we appropriately control for pre-inflow characteristics.&lt;/p&gt;<br>Classification-JEL: J08, J15<br>Keywords: Ethnic, employment, benefit, discrimination, matching<br>File-URL:http://www.ifs.org.uk/wps/wp0904.pdf<br>File-Format: application/pdf<br>File-Size: 138<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/03<br>Title: Geographic proximity and firm-university innovation linkages: evidence from Great Britain<br>Author-Name: Laura Abramovsky<br>Author-X-Name-First: Laura<br>Author-X-Name-Last: Abramovsky<br>Author-Email: l.abramovsky@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Helen Simpson<br>Author-X-Name-First: Helen<br>Author-X-Name-Last: Simpson<br>Author-Email: helen.simpson@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and CMPO, Bristol<br>Creation-Date: 200901<br>Length: 37 pp.<br>Number: W09/03<br>Abstract: &lt;p&gt;&lt;p&gt;We investigate evidence for spatially mediated knowledge transfer from university research. We examine whether firms locate their R&amp;D labs near universities, and whether those that do are more likely to co-operate with, or source knowledge from universities. We find that pharmaceutical firms locate R&amp;D near to frontier chemistry research departments, consistent with accessing localised knowledge spillovers, but also linked to the presence of science parks. In industries such as chemicals and vehicles there is less evidence of immediate co-location, but those innovative firms that do locate near to relevant research departments are more likely to engage with universities.&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: O3, R11, R13, I23<br>Keywords: Innovation, geography, spillovers, public research<br>File-URL:http://www.ifs.org.uk/wps/wp0903.pdf<br>File-Format: application/pdf<br>File-Size: 315<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/02<br>Title: The economics of a temporary VAT cut<br>Author-Name: Thomas Crossley<br>Author-X-Name-First: Thomas<br>Author-X-Name-Last: Crossley<br>Author-Email:  tfc22@cam.ac.uk <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Cambridge<br>Author-Name: Hamish Low<br>Author-X-Name-First: Hamish<br>Author-X-Name-Last: Low<br>Author-Email: Hamish.Low@econ.cam.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Trinity College, Cambridge<br>Author-Name: Matthew Wakefield<br>Author-X-Name-First: Matthew<br>Author-X-Name-Last: Wakefield<br>Author-Email: m.wakefield@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Bologna<br>Creation-Date: 200901<br>Length: <br>Number: W09/02<br>Abstract: &lt;p&gt;&lt;p&gt;1. The rate of VAT has been cut temporarily to 15%, with a return to 17.5% in place for the end of 2009. The government has predicted that this will increase consumer spending by about 0.5%. Much of the analysis of this tax cut has been critical of the policy and concluded that the government's estimates of the impact on spending are over-optimistic. The source of this criticism is a misunderstanding of the mechanism through which the tax cut will have an impact. In fact, we believe the  government's estimates are overly-pessimistic.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;2. There are two mechanisms through which the temporary VAT cut might affect spending:&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;first, it will increase spending power, making households feel as if they have more income. This mechanism is likely to be small partly because the tax cut increases income only for one year, and so the increase in total lifetime resources is very small, and partly because the lost revenue will have to be paid back.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;3. However, the second (often ignored) mechanism is likely to be much more important. This second mechanism is the effect that the tax cut will have through changing the price of goods bought in 2009 compared to 2010: the cost of goods bought in 2009 has fallen compared to goods bought in 2010 and this change in prices gives an incentive to bring forward consumer spending to this year, rather than waiting until next.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;4. Economic evidence on households' willingness to move spending from one year into an earlier (or later) year suggests that a 1% fall in the price today will translate into a 1% increase in spending. Since roughly only half of goods purchased are subject to VAT, the cut in the rate by 2.5% is like a cut in prices today by 1.25% and we would expect this to boost spending by about 1.25% over what it would otherwise be.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;5. Of course, this issue of what the spending would otherwise be is crucial: we will not now know what spending in 2009 would have been without the cut in VAT and even with the VAT cut, spending is likely to decline. Our point is simply that economic analysis shows that the cut in VAT will make the situation significantly less bad than it might otherwise have been.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;6. A natural comparison to the fiscal stimulus of a cut in VAT is a monetary stimulus through a cut in the interest rate: both make the price of spending today low compared to next year - an interest rate cut makes saving less attractive than current spending, as does the cut in VAT. The 1.25% fall in prices due to the cut in VAT reduces the price of spending today by more than a 1% point cut in the interest rate. It is surprising that some commentators have labeled the former as &quot;small&quot;, while the latter would typically be considered a large cut.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;7. There is however a difference between cutting interest rates and cutting VAT: a cut in interest rates penalises savers, whose spending power falls, and rewards borrowers. By contrast, the cut in VAT increases the spending power of savers (as well as borrowers) and this seems a fairer way to stimulate the economy.&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0902.pdf<br>File-Format: application/pdf<br>File-Size: 87<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:09/01<br>Title: Are two cheap, noisy measures better than one expensive, accurate one?<br>Author-Name: Martin Browning<br>Author-X-Name-First: Martin<br>Author-X-Name-Last: Browning<br>Author-Email: martin.browning@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Nuffield College, Oxford<br>Author-Name: Thomas Crossley<br>Author-X-Name-First: Thomas<br>Author-X-Name-Last: Crossley<br>Author-Email:  tfc22@cam.ac.uk <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Cambridge<br>Creation-Date: 200901<br>Length: <br>Number: W09/01<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;1. Survey responses are always subject to measurement error. In general surveys (and especially longitudinal surveys), there are severe constraints on the time that can be spent eliciting a less noisy response for any target variable. In this paper we consider when it may be better to consider multiple noisy measures of the target measure rather than improving the reliability of a single measure.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;2. The Kotlarski result states that if the measurement errors in two measures of the same&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;target variable are mutually independent and independent of the true value then we can recover the entire distribution of the quantity of interest, up to location.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;3. We consider designing surveys to deliver measurement error with desirable properties. This shifts the emphasis from reliability (the signal to noise ratio for any given measure) to the joint properties of the multiple measures.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;4. To illustrate our ideas, we consider a concrete example: the measurement of consumption inequality. A small simulation study suggests that the approach we propose has promise. The next step in this research agenda is experiments in survey data collection.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0901.pdf<br>File-Format: application/pdf<br>File-Size: 130<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:08/14<br>Title: Non cooperative household demand<br>Author-Name: Val&eacute;rie Lechene<br>Author-X-Name-First: Val&eacute;rie<br>Author-X-Name-Last: Lechene<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Ian Preston<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Preston<br>Author-Email: i.preston@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200812<br>Length: <br>Number: W08/14<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;We study noncooperative household models with two agents and several voluntarily contributed public goods, deriving the counterpart to the Slutsky matrix and demonstrating the nature of the deviation of its properties from those of a true Slutsky matrix in the unitary model. We provide results characterising both cases in which there are and are not jointly contributed public goods. Demand properties are contrasted with those for collective models and conclusions drawn regarding the possibility of empirically testing the collective model against noncooperative alternatives and the noncooperative model against a general alternative.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: D11, C72<br>Keywords: Nash equilibrium, Intra-household allocation, Slutsky symmetry.<br>File-URL:http://www.ifs.org.uk/wps/wp0814.pdf<br>File-Format: application/pdf<br>File-Size: 255<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:08/13<br>Title: Decomposing changes in income risk using consumption data<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Hamish Low<br>Author-X-Name-First: Hamish<br>Author-X-Name-Last: Low<br>Author-Email: Hamish.Low@econ.cam.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Trinity College, Cambridge<br>Author-Name: Ian Preston<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Preston<br>Author-Email: i.preston@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200811<br>Length: 54 pp.<br>Number: W08/13<br>Abstract: &lt;p&gt;&lt;p&gt;This paper concerns the decomposition of income risk into permanent and transitory components using repeated cross-section data on income and consumption. Our focus is on the detection of changes in the magnitudes of variances of permanent and transitory risks. A new approximation to the optimal consumption growth rule is developed. Evidence from a dynamic stochastic simulation is used to show that this approximation can provide a robust method for decomposing income risk in a nonstationary environment. We examine robustness to unobserved heterogeneity in consumption growth and to unobserved heterogeneity in income growth. We use this approach to investigate the growth in income inequality in the UK in the 1980s.&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: C30, D52, D91<br>Keywords: Income risk, inequality, approximation methods, consumption<br>File-URL:http://www.ifs.org.uk/wps/wp0813.pdf<br>File-Format: application/pdf<br>File-Size: 370<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:08/12<br>Title: 'Klin'-ing up: effects of Polish tax reforms on those in and on those out<br>Author-Name:  Leszek Morawski<br>Author-X-Name-First: Leszek<br>Author-X-Name-Last:  Morawski<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Michal Myck<br>Author-X-Name-First: Michal<br>Author-X-Name-Last: Myck<br>Author-Email: see DIW-Berlin website: <a href="http://www.diw.de">www.diw.de</a>@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and DIW-Berlin<br>Creation-Date: 200811<br>Length: 31 pp.<br>Number: W08/12<br>Abstract: &lt;p&gt;In 2007 and 2008 Polish governments introduced a series of reforms which led to a substantial reduction in the tax &quot;wedge&quot; (in Polish: &quot;klin&quot;) on labour. The mean ATR on total labour cost was reduced from 41.6% to 34.0%. We show that when considered together the package of introduced reforms brought much greater reductions in the tax burden compared to a widely discussed 15% &quot;flat tax&quot;.  In the analysis we show the effects of the reforms both for the employed and for the non-employed populations. The latter analysis is done in such a way as to account for the entire (simulated) distribution of wages of the non-employed and shows interesting differences between the effects of reforms on employed and non-employed individuals. We argue that to fully appreciate the effect of reductions in labour taxation it is important to bear in mind that one of the reasons for introducing them is to make employment more likely for those who currently do not work. Given the extent of the reductions in the &quot;klin&quot; it is somewhat surprising that so far so little attention has been given to the recent Polish reforms. &lt;/p&gt;<br>Classification-JEL: H24, J21, J31<br>Keywords: Work incentives, tax wedge, labour costs, employment<br>File-URL:http://www.ifs.org.uk/wps/wp0812.pdf<br>File-Format: application/pdf<br>File-Size: 345<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:08/11<br>Title: Are boys and girls affected differently when the household head leaves for good? Evidence from school and work choices in Colombia<br>Author-Name: Emla Fitzsimons<br>Author-X-Name-First: Emla<br>Author-X-Name-Last: Fitzsimons<br>Author-Email: e.fitzsimons@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Alice Mesnard<br>Author-X-Name-First: Alice<br>Author-X-Name-Last: Mesnard<br>Author-Email: a.mesnard@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200811<br>Length: <br>Number: W08/11<br>Abstract: &lt;p&gt;&lt;p&gt;This paper investigates how the permanent departure of the head from the household, mainly due to death or divorce, affects children's school enrolment and work participation in rural Colombia. In our empirical specification we use household-level fixed effects to deal with the fact that households that experience the departure of the head are likely to differ in unobserved ways from those that do not, and we also address the issue of non-random attrition from the panel. We find remarkably different effects for boys and girls. For boys, the adverse event reduces school participation and increases participation in paid work, whereas for girls we find evidence of the adverse event having a beneficial impact on schooling. To explain these differences, we provide evidence for boys consistent with the head's departure having an important effect through the income reduction associated with it, whereas for girls, changes in the household decision-maker appear to play an important role.&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: I20, J12, J22, O16<br>Keywords: Child labour; schooling; adverse event; income loss; credit and insurance market failures; bargaining<br>File-URL:http://www.ifs.org.uk/wps/wp0811.pdf<br>File-Format: application/pdf<br>File-Size: 187<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:08/10<br>Title: The location of innovative activity in Europe<br>Author-Name: Laura Abramovsky<br>Author-X-Name-First: Laura<br>Author-X-Name-Last: Abramovsky<br>Author-Email: l.abramovsky@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Gareth Macartney<br>Author-X-Name-First: Gareth<br>Author-X-Name-Last: Macartney<br>Author-Email: gareth_m@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Helen Miller<br>Author-X-Name-First: Helen<br>Author-X-Name-Last: Miller<br>Author-Email: helen_m@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200811<br>Length: 56 pp.<br>Number: W08/10<br>Abstract: &lt;p&gt;&lt;p&gt;In this paper we use new data to describe how firms from 15 European countries organise their innovative activities. The data matches firm level accounting data with information on the patents that those firms and their subsidiaries have applied for at the European Patents Office. We describe the data in detail. &lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: F21, F23, O3, H3<br>Keywords: International investment and multinational firms; technological change and research and development; fiscal policies and behaviour of economic agents<br>File-URL:http://www.ifs.org.uk/wps/wp0810.pdf<br>File-Format: application/pdf<br>File-Size: 1400<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:08/09<br>Title: Does welfare reform affect fertility? Evidence from the UK<br>Author-Name: Mike Brewer<br>Author-X-Name-First: Mike<br>Author-X-Name-Last: Brewer<br>Author-Email: m.brewer@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and ISER, Essex University<br>Author-Name: Anita Ratcliffe<br>Author-X-Name-First: Anita<br>Author-X-Name-Last: Ratcliffe<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and CMPO, University of Bristol<br>Author-Name: Sarah Smith<br>Author-X-Name-First: Sarah<br>Author-X-Name-Last: Smith<br>Author-Email: sarah.smith@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Centre for Market and Public Organisation<br>Creation-Date: 200811<br>Length: 43 pp.<br>Number: W08/09<br>Abstract: &lt;p&gt;In 1999 the UK government made major reforms to the system of child-contingent benefits, including the introduction of Working Families' Tax Credit and an increase in means-tested Income Support for families with children.  Between 1999-2003 government spending per-child on these benefits rose by 50 per cent in real terms, a change that was unprecedented over a thirty year period.  This paper examines whether there was a response in childbearing.  To identify the effect of the reforms, we exploit the fact that the spending increases were targeted at low-income households and we use the (exogenously determined) education of the woman and her partner to define treatment and control groups.  We argue that the reforms are most likely to have a positive fertility effect for women in couples and show that this is the case.  We find that there was an increase in births (by around 15 per cent) among the group affected by the reforms.  &lt;/p&gt;<br>Classification-JEL: J13, J18, H53<br>Keywords: Welfare reform; fertility; Working Families Tax Credit <br>File-URL:http://www.ifs.org.uk/wps/wp0809.pdf<br>File-Format: application/pdf<br>File-Size: 271<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:08/08<br>Title: Optimal taxation in the extensive model<br>Author-Name:  Phillippe Chon&eacute;<br>Author-X-Name-First: Phillippe<br>Author-X-Name-Last:  Chon&eacute;<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Guy Laroque<br>Author-X-Name-First: Guy<br>Author-X-Name-Last: Laroque<br>Author-Email: laroque@ensae.fr<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200811<br>Length: 29 pp.<br>Number: W08/08<br>Abstract: &lt;p&gt;We study optimal taxation in the general extensive model: the only decision of the participants in the economy is to choose between working (full time) or staying inactive. People differ in their productivities and in other features which determine their work opportunity costs. The qualitative properties of optimal tax schemes are presented, with an emphasis on the role of heterogeneity in the equity-efficiency tradeoff. When the government has a redistributive stance, there are a number of cases where the low skilled workers face larger financial incentives to work than in the laissez-faire (negative average tax rates). In particular, this occurs whenever the social weights vary continuously with income and the social weight assigned to the less skilled workers is larger than average.&lt;/p&gt;<br>Classification-JEL: H21, H31<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0808.pdf<br>File-Format: application/pdf<br>File-Size: 345<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:08/07<br>Title: Separability and public finance<br>Author-Name:  St&eacute;phane Gauthier<br>Author-X-Name-First: St&eacute;phane<br>Author-X-Name-Last:  Gauthier<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Guy Laroque<br>Author-X-Name-First: Guy<br>Author-X-Name-Last: Laroque<br>Author-Email: laroque@ensae.fr<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200811<br>Length: 18 pp.<br>Number: W08/07<br>Abstract: &lt;p&gt;&lt;p&gt;In a second best environment, the optimal policy choice sometimes follows the first best rules. This note lays down the information structure and separability assumptions under which this property holds in a variety of setups.&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: H21, H11<br>Keywords: separability, second best optimality, indirect taxes, Samuelson rule, Pigovian taxation<br>File-URL:http://www.ifs.org.uk/wps/wp0807.pdf<br>File-Format: application/pdf<br>File-Size: 165<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:08/06<br>Title: Wage risk and employment risk over the life cycle<br>Author-Name: Hamish Low<br>Author-X-Name-First: Hamish<br>Author-X-Name-Last: Low<br>Author-Email: Hamish.Low@econ.cam.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Trinity College, Cambridge<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name: Luigi Pistaferri<br>Author-X-Name-First: Luigi<br>Author-X-Name-Last: Pistaferri<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Stanford University<br>Creation-Date: 200809<br>Length: <br>Number: W08/06<br>Abstract: &lt;p&gt;&lt;p&gt;We specify a structural life-cycle model of consumption, labour supply and job mobility in an economy with search frictions that allows us to distinguish between different sources of risk and to estimate their effects. The sources of risk are shocks to productivity, job destruction, the process of job arrival when employed and unemployed and match level heterogeneity. Our model allows for four main social insurance programmes. In contrast to simpler models that attribute all income fluctuations to shocks, our framework allows us to disentangle the effects of the shocks from the responses to these shocks. Estimates of productivity risk, once we control for employment risk and for individual labour supply choices, are substantially lower than estimates that attribute all wage variation to productivity risk. Increases in productivity risk impose a considerable welfare loss on individuals and induce substantial precautionary saving. Increases in employment risk have large effects on output and, primarily through this channel, affect welfare. The welfare value of government programs such as food stamps which partially insure productivity risk is greater than the value of unemployment insurance which provides (partial) insurance against employment risk and no insurance against persistent shocks. &lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: D91, H31, J64<br>Keywords: Uncertainty, life-cycle models, unemployment, precautionary savings<br>File-URL:http://www.ifs.org.uk/wps/wp0806.pdf<br>File-Format: application/pdf<br>File-Size: 639<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:08/05<br>Title: The retirement consumption puzzle: evidence from a regression discontinuity approach<br>Author-Name: Erich Battistin<br>Author-X-Name-First: Erich<br>Author-X-Name-Last: Battistin<br>Author-Email: e.battistin@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Agar Brugiavini<br>Author-X-Name-First: Agar<br>Author-X-Name-Last: Brugiavini<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Venice<br>Author-Name:  Enrico Rettore<br>Author-X-Name-First: Enrico<br>Author-X-Name-Last:  Rettore<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Guglielmo Weber<br>Author-X-Name-First: Guglielmo<br>Author-X-Name-Last: Weber<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Padua<br>Creation-Date: 200807<br>Length: <br>Number: W08/05<br>Abstract: &lt;p&gt;&lt;p&gt;In this paper we investigate the size of the consumption drop at retirement in Italy. We use micro data on food and total non-durable household spending covering the period 1993-2004, and evaluate the change in consumption that accompanies retirement by exploiting the exogenous variability in pension eligibility to correct for the endogenous nature of the retirement decision. We take a regression discontinuity approach, and make the identifying assumption that consumption would be the same around the threshold for pension eligibility if individuals would not retire. We check in our data that a non-negligible fraction of individuals retire as soon as they become eligible, and estimate at 9:8% the part of the non-durable consumption drop that is associated with retirement induced by eligibility. We show that such fall is not driven by liquidity problems for the less well off in the population, and can be accounted for by drops in goods that are work-related expenses or leisure substitutes. However, we also show that retirement induces a significant drop in the number of grown children living with their parents, and this can account for most of the retirement consumption drop.&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: D9, E2<br>Keywords: Consumption, regression discontinuity design, retirement<br>File-URL:http://www.ifs.org.uk/wps/wp0805<br>File-Format: application/pdf<br>File-Size: 346<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:08/04<br>Title: Labour supply and taxes<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name: David Phillips<br>Author-X-Name-First: David<br>Author-X-Name-Last: Phillips<br>Author-Email: david_p@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200803<br>Length: <br>Number: W08/04<br>Abstract: &lt;p&gt;&lt;p&gt;In this paper we provide an overview of the literature relating labour supply to taxes and welfare benefits with a focus on presenting the empirical consensus. We begin with a basic continuous hours model, where individuals have completely free choice over their hours of work. We then consider fixed costs of work, the complications introduced by the benefits system, dynamic aspects of labour supply and we place the analysis in the context of the family. The key conclusion of this work is that in order to estimate the impact of tax reform and be able to generalise results, a structural approach that takes account of many of these issues is desirable. We then discuss the 'new Tax Responsiveness' literature which uses the response of taxable income to the marginal tax rate as a summary statistic of the behavioural response to taxation. Underlying this approach is the unsatisfactory nature of using hours as a proxy for labour effort for those with high levels of autonomy on the job and who already work long hours, such as the self employed or senior executives. After discussing relevant theory we then provide a summary of empirical estimates and the methodology underlying the studies. Our conclusion is that hours of work are relatively inelastic for men, but are a little more responsive for married women and lone mothers. On the other hand, participation is quite sensitive to taxation and benefits for women. Within this paper we present new estimates form a discrete participation model for both married and single men based on the numerous reforms over the past two decades in the UK. We find that the participation of low education men is somewhat more responsive to incentives than previously thought. For men with high levels of education, participation is virtually unresponsive; here the literature on taxable income suggests that there may be significant welfare costs of taxation, although much of this seems to be a result of shifting income and consumption to non-taxable forms as opposed to actual reductions in work effort.&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: J22, H24, H31<br>Keywords: Labour Supply, Income taxation, Welfare Benefits, Tax Credits, Incentive Effects<br>File-URL:http://www.ifs.org.uk/wps/wp0804.pdf<br>File-Format: application/pdf<br>File-Size: 638<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:08/03<br>Title: Skill-based technology adoption: firm-level evidence from Brazil and India<br>Author-Name:  Rupert Harrison<br>Author-X-Name-First: Rupert<br>Author-X-Name-Last:  Harrison<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200802<br>Length: 71 pp.<br>Number: W08/03<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;This paper provides the first firm-level econometric evidence on the skill-bias of ICT in developing countries using a unique new dataset of manufacturing firms in Brazil and India. I use detailed information on firms' adoption of ICT and the educational composition of their workforce to estimate skill-share equations in levels and long differences. The results are strongly suggestive of skill-biased ICT adoption, with ICT able to explain up to a third of the average increase in the share of skilled workers in Brazil and up to one half in India. I then use variation in the relative supply of skilled workers across states within each country to identify the skill-bias of ICT. The results are again consistent with skill-bias in both countries, and are mainly robust to various methods of controlling for unobserved heterogeneity across states. The magnitudes of the estimated effects from both approaches are surprisingly similar for the two countries. Overall, the results suggest that new developments in ICT are diffusing rapidly through the manufacturing sectors of both Brazil and India, with similar implications for the demand for skills in two very different and geographically distant countries. This evidence is consistent with ongoing pervasive skill-biased technological change associated with ICT throughout much of the developed and developing world. The implications for future developments in inequality both within and between countries are potentially far-reaching.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: J2, O14, O33<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0803.pdf<br>File-Format: application/pdf<br>File-Size: 705<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:08/02<br>Title: Changing public sector wage differentials in the UK<br>Author-Name: Richard Disney<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Disney<br>Author-Email: richard.disney@nottingham.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Nottingham<br>Author-Name: Amanda Gosling<br>Author-X-Name-First: Amanda<br>Author-X-Name-Last: Gosling<br>Author-Email: ag251@kent.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Kent<br>Creation-Date: 200802<br>Length: 20 pp.<br>Number: W08/02<br>Abstract: &lt;p&gt;The paper estimates public sector wage differentials and their changes over time for men and women in the United Kingdom using panel data from the New Earnings Survey/Annual Survey of Hours and Earnings for the period 1975 to 2006.  It presents estimates that are robust to unobserved workforce characteristics and that also show the impact of policy changes and cyclical factors, by allowing the average measured public sector 'premium' or 'penalty' to be time-varying.  The methodology also allows us to examine the extent to which discrepancies in public and private sector pay induce changing relative qualities of the sectoral workforces.  &lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;Results are given for men and women comparing mean wages in the public and private sectors as a whole. There is, on average, a very small positive premium over the whole period for public sector women and a very small penalty for men; however the variability of the differential is much more striking than the average difference.  &lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;The method can also be applied to sub-groups in the labour market, and we illustrate the case of female public sector nurses and midwives, where the comparison group are private sector workers who have ever been, or will be, public sector nurses or midwives. Measured variations in this nurses' differential reflects the various changes in pay structure and government pay policies over the period; it is striking however that in the last decade, the 'raw' differential accruing to public sector nurses and midwives has declined almost continuously, whereas the composition and quality-adjusted differential shows no overall trend.   &lt;/p&gt;<br>Classification-JEL: J31, J58<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0802.pdf<br>File-Format: application/pdf<br>File-Size: 190<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:08/01<br>Title: Employment, hours of work and the optimal taxation of low income families<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Andrew Shephard<br>Author-X-Name-First: Andrew<br>Author-X-Name-Last: Shephard<br>Author-Email: a.shephard@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200801<br>Length: 59 pp.<br>Number: W08/01<br>Abstract: &lt;p&gt;&lt;p&gt;This paper examines the tax schedule for low income families with children. We take an optimal tax approach based on a structural labour supply model which incorporates unobserved heterogeneity, fixed costs of work, childcare costs and the detailed non-convexities of the tax and transfer system. The motivation is the British earned income tax credit reform (WFTC) and its interaction with the tax and transfer system for lone parents. Our analysis also examines the case for the use of hours-contingent payments. The results point to a tax schedule which depends on the age of children, with tax credits only optimal for low earners with school age children. The results also suggest a welfare improving role for hours-contingent payments although this is mitigated when hours cannot be monitored or recorded accurately by the tax authorities.&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0801.pdf<br>File-Format: application/pdf<br>File-Size: 422<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/21<br>Title: Integrating Income Tax and National Insurance: an interim report<br>Author-Name: Stuart Adam<br>Author-X-Name-First: Stuart<br>Author-X-Name-Last: Adam<br>Author-Email: s.adam@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name:  Glen Loutzenhiser<br>Author-X-Name-First: Glen<br>Author-X-Name-Last:  Loutzenhiser<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200712<br>Length: <br>Number: W07/21<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;Income Tax and National Insurance are now sufficiently similar that merging them appears to be a plausible option, yet still sufficiently different that integration raises significant difficulties. This paper surveys the potential benefits of integration - increased transparency and reduced administrative and compliance costs - and the potential obstacles, assessing the extent to which each of the differences between Income Tax and NICs - in particular the contributory principle, the levying of an employer charge and the differences in tax base - constitute serious barriers to integration. The paper concludes that few of the difficulties look individually prohibitive, but that trying too hard to avoid significant reform of the current policy framework could produce a merged tax so complicated as to nullify much or all of the benefits of integration.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: H24, H25, H83, K34<br>Keywords: Taxation, social insurance, administration<br>File-URL:http://www.ifs.org.uk/wps/wp2107.pdf<br>File-Format: application/pdf<br>File-Size: 486<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/20<br>Title: Welfare reform in the UK: 1997 - 2007<br>Author-Name: Mike Brewer<br>Author-X-Name-First: Mike<br>Author-X-Name-Last: Brewer<br>Author-Email: m.brewer@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and ISER, Essex University<br>Creation-Date: 200705<br>Length: <br>Number: W07/20<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;&lt;p&gt;This paper, written at the request of the Economic Council of Sweden, presents a tour of welfare reform in the UK since the last change of government, summarising the most important changes in active labour market policies, and in measures intended to strengthen financial incentives to work. It argues that developments in the UK's active labour market policies occurred in two broad phases: first, the Government sought to strengthen ALMPs for those individuals deemed to be unemployed, through the New Deal programme. Second, the Government has reformed benefits for individuals traditionally viewed as inactive and thus excused job search activity, such as lone parents, and the sick and disabled. Accompanying these have been changes to direct taxes, tax credits and welfare benefits aiming to strengthen financial work incentives. However, financial work incentives have been strengthened by less than might be expected given the early rhetoric: the expansion in family-based tax credits have weakened the financial work incentives of (potential) second earners in families with children, many more workers now face combined marginal tax and tax credit withdrawal rates in excess of 60% than a decade ago, and a desire to achieve broad reductions in relative child poverty has led the Government to increase substantially income available to non-working families with children. We also summarise evaluations of three important UK welfare-to-work reforms (WFTC, NDYP and Pathways to Work), but without comparing their efficacy.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp2007.pdf<br>File-Format: application/pdf<br>File-Size: 375<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/19<br>Title: Tax reform and retirement saving incentives: evidence from the introduction of stakeholder pensions in the UK<br>Author-Name: Richard Disney<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Disney<br>Author-Email: richard.disney@nottingham.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Nottingham<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Matthew Wakefield<br>Author-X-Name-First: Matthew<br>Author-X-Name-Last: Wakefield<br>Author-Email: m.wakefield@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Bologna<br>Creation-Date: 200711<br>Length: <br>Number: W07/19<br>Abstract: &lt;p&gt;&lt;p&gt;Faced with ageing populations, OECD governments are seeking policies to increase individual retirement saving. In April 2001, the UK government introduced Stakeholder Pensions - a low cost retirement saving vehicle.  The reform also changed the structure of tax-relieved contribution ceilings, increasing their generosity for lower earning individuals.  We examine the impact of these changes on private pension coverage and on contributions to personal pension accounts using individual level micro data. &lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1907.pdf<br>File-Format: application/pdf<br>File-Size: 520<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/18<br>Title: Higher education funding reforms in England: the distributional effects and the shifting balance of costs<br>Author-Name: Lorraine Dearden<br>Author-X-Name-First: Lorraine<br>Author-X-Name-Last: Dearden<br>Author-Email: l.dearden@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London<br>Author-Name: Emla Fitzsimons<br>Author-X-Name-First: Emla<br>Author-X-Name-Last: Fitzsimons<br>Author-Email: e.fitzsimons@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Alissa Goodman<br>Author-X-Name-First: Alissa<br>Author-X-Name-Last: Goodman<br>Author-Email: a.goodman@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Greg Kaplan<br>Author-X-Name-First: Greg<br>Author-X-Name-Last: Kaplan<br>Author-Email: g.kaplan@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200710<br>Length: <br>Number: W07/18<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;p&gt;This paper undertakes a quantitative analysis of substantial reforms to the system of higher education (HE) finance in England, first announced in 2004 and revised in 2007. The reforms introduced deferred fees for HE, payable by graduates through the tax system via income-contingent repayments on loans subsidised by the government. The paper uses lifetime earnings simulated by the authors to consider the likely distributional consequences of the reforms for graduates. It also considers the costs of the reforms for taxpayers, and how the reforms are likely to shift the balance of funding for HE between the public and private sectors.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1807.pdf<br>File-Format: application/pdf<br>File-Size: 421<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/17<br>Title: What is a public sector pension worth?<br>Author-Name: Richard Disney<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Disney<br>Author-Email: richard.disney@nottingham.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Nottingham<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Gemma Tetlow<br>Author-X-Name-First: Gemma<br>Author-X-Name-Last: Tetlow<br>Author-Email: g.tetlow@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200710<br>Length: <br>Number: W07/17<br>Abstract: &lt;p&gt;&lt;p&gt;We measure accruals in defined benefit (DB) pension plans for public and private sector workers in Britain, using typical differences in scheme rules and sector-specific lifetime age-earnings profiles by sex and educational group. We show not just that coverage by DB pension plans is greater in the public sector, but that median pension accruals as a % of salary are almost 5% higher among DB-covered public sector workers than covered private sector workers. This is largely driven by earlier normal pension (retirement) ages. For workers of different ages in the two sectors, marginal accruals also vary as a result of differences in earnings profiles across the sectors. The differences in earnings profiles across sectors should induce caution in using calculated coefficients on wages from cross sections of data in order to estimate sectoral wage effects. &lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: H55, J32, J63<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1707.pdf<br>File-Format: application/pdf<br>File-Size: 191<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/16<br>Title: Heterogeneity in consumer demands and the income effect: evidence from panel data<br>Author-Name: Mette Christensen<br>Author-X-Name-First: Mette<br>Author-X-Name-Last: Christensen<br>Author-Email: m.christensen@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Creation-Date: 200709<br>Length: <br>Number: W07/16<br>Abstract: &lt;p&gt;All micro studies of demand are based on using time series cross sectional data. Because in such data each household is only observed once, it is only under strong identifying restrictions that one can interpret the coefficients on consumer behavior. For example, if tastes are correlated with income, the usual estimates of income elasticities from cross sectional data are biased. In contrast, panel data allows identification of the coefficients on consumer behavior in the presence of unobservable correlated heterogeneity. In this paper we make use of a unique Spanish panel data set on household expenditures to test whether unobservable heterogeneity in household demands (taste) is correlated with total expenditures (income). We find that tastes are indeed correlated with income for half of the goods considered.&lt;/p&gt;<br>Classification-JEL: C33, D12<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1607.pdf<br>File-Format: application/pdf<br>File-Size: 280<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/15<br>Title: Maternal education, home environments and the development of children and adolescents<br>Author-Name: Pedro Carneiro<br>Author-X-Name-First: Pedro<br>Author-X-Name-Last: Carneiro<br>Author-Email: p.carneiro@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name: Matthias Parey<br>Author-X-Name-First: Matthias<br>Author-X-Name-Last: Parey<br>Author-Email: matthias_p@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200709<br>Length: <br>Number: W07/15<br>Abstract: &lt;p&gt;There is a striking increase in inequality in children's home environments over the last 50 years (McLanahan, 2004). These are measured as differences in age of mothers of young children (below 5), maternal employment, single motherhood, divorce during the first 10 years of marriage, father's involvement, and family income, for mothers with different levels of education. This trend is cause for great concern because the home environment is probably the best candidate for explaining inequality in child development.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;Proposals to address this problem often rely on changes to the welfare system. However, given that home environments are rooted in the experiences of each family, they are probably difficult to change if we rely only the welfare system, while more direct interventions require invading family autonomy and privacy and are notoriously difficult to enforce. Therefore, one possible alternative is to target future parents in their youth, by affecting their education, before they start forming a family. In this paper we assess the potential for such a policy, by estimating the impact of maternal education on home environments and on child outomes.&lt;/p&gt;&lt;p&gt;	&lt;/p&gt;&lt;p&gt;We provided a unified analysis of different aspects of child development, including cognitive, noncognitive, and health outcomes, across ages. We also estimate the impact of maternal education not only on parental characteristics like employment, income, marital status, spouse's education, age at first birth, but also on several aspects of parenting practices. Our paper provides a detailed analysis of the possible mechanisms mediating the relationship between parental education and child outcomes. Finally, we compare the relative roles of maternal education and ability, and we show how the role of maternal education varies with the gender and race of the child, and with the cognitive ability of the mother.&lt;/p&gt;&lt;p&gt;	&lt;/p&gt;&lt;p&gt;We show that maternal education has positive impacts both on cognitive skills and behavioral problems of children, but the latter are more sustained than the former. This is perhaps because behavior is more malleable than cognition. Especially among whites, there is considerable heterogeneity in these impacts, which are larger for girls, and for mothers with higher cognition.&lt;/p&gt;&lt;p&gt;	&lt;/p&gt;&lt;p&gt;More educated mothers are more likely to work and work for longer hours, especially among blacks. This is true independently of the child being in its infancy, childhood, and adolescence. Nevertheless, there is no evidence that more educated mothers do less breastfeeding, spend much less time reading to their children, or even taking them on outings. This is important because some studies suggest that maternal employment may be detrimental for child outcomes if it leads to reduced (quality) time with children.&lt;/p&gt;&lt;p&gt;	&lt;/p&gt;&lt;p&gt;Due to the nature of the data, this paper focuses on the effect of maternal, but not paternal, schooling. Due to assortative mating, part of the effects we find may be driven by the father's schooling through a mating effect. However, unless the effect of partner's schooling is incredibly large, assortative mating cannot fully explain our main results, as suggested in some of the literature.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1507.pdf<br>File-Format: application/pdf<br>File-Size: 322<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/14<br>Title: Integrability of demand accounting for unobservable heterogeneity: a test on panel data<br>Author-Name: Mette Christensen<br>Author-X-Name-First: Mette<br>Author-X-Name-Last: Christensen<br>Author-Email: m.christensen@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Creation-Date: 200709<br>Length: <br>Number: W07/14<br>Abstract: &lt;p&gt;&lt;p&gt;In recent years it has become apparent that we must take unobservable heterogeneity into account when conducting empirical consumer demand analysis. This paper is concerned with integrability (that is, whether demand is consistent with utility maximization) of the conditional mean demand (that is, the estimated demand) when allowing for unobservable heterogeneity. &lt;/p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;p&gt;Integrability is important because it is necessary in order for the demand system estimates to be used for welfare analysis. Conditions for conditional mean demand to be integrable in the presence of unobservable heterogeneity are developed in the literature. There is, however, little empirical evidence suggesting whether these conditions for integrability are likely to be met in the data or not. In this paper we exploit the fact that the integrability conditions have testable implications for panel data and use a unique long panel data set to test them. Because of the sizeable longitudinal length of the panel, we are able to identify a very flexible specification of unobservable heterogeneity: We model individual demands as an Almost Ideal Demand system and allow for unobservable heterogeneity by allowing all intercept and slope parameters of the demand system to be individual-specific. We test the conditions for integrability of the conditional mean demand of this demand system. We do not reject them. This means that the conditional mean demand generated by a population of consumers with different preferences described by different Almost Ideal Demand systems is consistent with utility maximization. Given that integrability is not rejected, we conclude by an comparing the estimated demand system elasticties and welfare effects from a model with no heterogeneity (which is the model that would usually be estimated from cross sectional data) to those obtained from our heterogeneous model. &lt;/p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;p&gt;We find that the homogeneous model severely overestimates income elasticities for luxury goods and that the welfare effects from the heterogeneous model exhibit a large amount of heterogeneity, but deviate with only a few percentage points from the homogeneous model at the mean.&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1407.pdf<br>File-Format: application/pdf<br>File-Size: 385<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/13<br>Title: An empirical investigation of labor income processes<br>Author-Name: Fatih Guvenen<br>Author-X-Name-First: Fatih<br>Author-X-Name-Last: Guvenen<br>Author-Email: guvenen@umn.edu<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Rochester<br>Creation-Date: 200708<br>Length: <br>Number: W07/13<br>Abstract: &lt;p&gt;In this paper we reassess the evidence on labor income risk. There are two leading views on the nature of the income process in the current literature. The first view, which we call the &quot;Restricted Income Profiles&quot; RIP process, holds that individuals are subject to large and very persistent shocks, while facing similar life-cycle income profiles. The alternative view, which we call the &quot;Heterogeneous Income Profiles&quot; HIP process, holds that individuals are subject to income shocks with modest persistence, while facing individual-specific income profiles. We first show that ignoring profile heterogeneity, when in fact it is present, introduces an upward bias into the estimates of persistence. Second, we estimate a parsimonious parameterization of the HIP process that is suitable for calibrating economic models. The estimated persistence is about 0.8 in the HIP process compared to about 0.99 in the RIP process. Moreover, the heterogeneity in income profiles is estimated to be substantial, explaining between 56 to 75 percent of income inequality at age 55. We also find that profile heterogeneity is substantially larger among higher educated individuals. Third, we discuss the source of identification - in other words, the aspects of labor income data that allow one to distinguish between the HIP and RIP processes. Finally, we show that the main evidence against profile heterogeneity in the existing literature - that the autocorrelations of income changes are small and negative - is also replicated by the HIP process, suggesting that this evidence may have been misinterpreted.&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1307.pdf<br>File-Format: application/pdf<br>File-Size: 16<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/12<br>Title: Better prepared for retirement? Using panel data to improve wealth estimates of ELSA respondents<br>Author-Name: James Banks<br>Author-X-Name-First: James<br>Author-X-Name-Last: Banks<br>Author-Email: j.banks@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Gemma Tetlow<br>Author-X-Name-First: Gemma<br>Author-X-Name-Last: Tetlow<br>Author-Email: g.tetlow@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200708<br>Length: <br>Number: W07/12<br>Abstract: &lt;p&gt;&lt;p&gt;We compare the key assumptions underpinning estimates of the pension wealth of ELSA respondents to outcomes over the period from 2002-03 to 2004-05. We find that many of these assumptions have, on average, proved cautious or reasonable. Improving pension wealth calculations using this new evidence makes little difference to the distribution of pension wealth. Previous estimates of retirement resources also considered net financial, physical and housing wealth. Particularly cautious, ex-post, was the assumption that net housing wealth would remain constant in real terms. We find that average housing wealth has risen by almost 40% in nominal terms over just two years, which is in line with growth in the Nationwide House Price Index. This large increase in house prices boosts estimates of total wealth across the entire distribution of wealth. Previous research showed that once half of current net housing wealth was included as a retirement resource 12.6% of employees approaching retirement were estimated to have resources below the Pensions Commission's definition of adequacy. We show that taking into account the high growth in house prices between 2002-03 and 2004-05 reduces this to 10.9%, and that it would fall by a further 1.2 percentage points if house prices were to grow by 2.5% a year in real terms in the future.&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1207.pdf<br>File-Format: application/pdf<br>File-Size: 480<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/11<br>Title: Differences in the measurement and structure of wealth using alternative data sources: the case of the UK<br>Author-Name: Zo&euml; Oldfield<br>Author-X-Name-First: Zo&euml;<br>Author-X-Name-Last: Oldfield<br>Author-Email: z.oldfield@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name:  Eva Sierminska<br>Author-X-Name-First: Eva<br>Author-X-Name-Last:  Sierminska<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200708<br>Length: <br>Number: W07/11<br>Abstract: &lt;p&gt;In this paper, we identify methodological differences and similarities in the measurement of wealth using survey data constructed for different purposes in the United Kingdom and England. The focus of the paper is on two prominent surveys in the UK: the English Longitudinal Survey of Ageing (ELSA) and the British Household Panel Survey (BHPS). We find conceptual difference in the measurement of financial assets and debt.  At the same time, striking similarities exist in the measurement of non-financial assets. For the most part, many differences arise in the tails of the distributions of wealth. Comparable definitions of overall wealth in the surveys lead us to find a 10%  and 3% difference in mean and conditional median of total net worth, respectively. Reassuring is the fact that inequality results carried out with the two surveys support one another and quantile regression shows that the distribution of total net worth across demographic groups is similar in the two surveys. &lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp1107.pdf<br>File-Format: application/pdf<br>File-Size: 568<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/10<br>Title: Why do home owners work longer hours?<br>Author-Name: Renata Bottazzi<br>Author-X-Name-First: Renata<br>Author-X-Name-Last: Bottazzi<br>Author-Email: r.bottazzi@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Hamish Low<br>Author-X-Name-First: Hamish<br>Author-X-Name-Last: Low<br>Author-Email: Hamish.Low@econ.cam.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Trinity College, Cambridge<br>Author-Name: Matthew Wakefield<br>Author-X-Name-First: Matthew<br>Author-X-Name-Last: Wakefield<br>Author-Email: m.wakefield@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Bologna<br>Creation-Date: 200707<br>Length: <br>Number: W07/10<br>Abstract: &lt;p&gt;This paper uses a structural model to address the question of why home-owners with large mortgage debt work longer hours than those without such debt. We consider whether this is due to lower net wealth or to capital market imperfections, including mortgage constraints that depend on current earnings and, therefore, labour supply choices. We show that the need to meet current mortgage commitments can generate the observed correlation, and this impact of current commitments arises from the institutional borrowing constraints. We also show that labour supply as a function of household debt is highly nonlinear: those with greater debt are more likely to face binding borrowing constraints and their labour supply is more variable.&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0710.pdf<br>File-Format: application/pdf<br>File-Size: 360<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/09<br>Title: Consumption inequality and intra-household allocations<br>Author-Name: Jeremy Lise<br>Author-X-Name-First: Jeremy<br>Author-X-Name-Last: Lise<br>Author-Email: j.lise@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name:  Shannon Seitz<br>Author-X-Name-First: Shannon<br>Author-X-Name-Last:  Seitz<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200707<br>Length: <br>Number: W07/09<br>Abstract: &lt;p&gt;The consumption literature uses adult equivalence  scales to measure individual level inequality. This practice imposes the assumption that there is no within household inequality. &lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;In this paper, we show that ignoring consumption inequality within households produces misleading estimates of inequality along two dimensions.  First, the use of adult equivalence scales underestimates the level of cross sectional consumption inequality by 30 percent, as large differences in the earnings of husbands and wives translate into large differences in consumption allocations within households. Second, the rise in inequality since the 1970s is overstated by almost two-thirds: within household inequality declined over time as the share of income provided by wives increased. Our findings also indicate that  increases in marital sorting on wages and hours worked can simultaneously explain virtually all of the decline in within household inequality and a substantial fraction of the rise in between household inequality for one and two adult households in the UK since the 1970s.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0709.pdf<br>File-Format: application/pdf<br>File-Size: 414<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/08<br>Title: Why is consumption more log normal than income? Gibrat's law revisited<br>Author-Name: Erich Battistin<br>Author-X-Name-First: Erich<br>Author-X-Name-Last: Battistin<br>Author-Email: e.battistin@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Arthur Lewbel<br>Author-X-Name-First: Arthur<br>Author-X-Name-Last: Lewbel<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Boston College<br>Creation-Date: 200707<br>Length: <br>Number: W07/08<br>Abstract: &lt;p&gt;&lt;p&gt;Significant departures from log normality are observed in income data, in violation of Gibrat's law. We identify a new empirical regularity, which is that the distribution of consumption expenditures across households is, within cohorts, closer to log normal than the distribution of income. We explain these empirical results by showing that the logic of Gibrat's law applies not to total income, but to permanent income and to maginal utility. These findings have important implications for welfare and inequality measurement, aggregation, and econometric model analysis.&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0708.pdf<br>File-Format: application/pdf<br>File-Size: 539<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/07<br>Title: Investment abroad and adjustment at home: evidence from UK multinational firms<br>Author-Name: Helen Simpson<br>Author-X-Name-First: Helen<br>Author-X-Name-Last: Simpson<br>Author-Email: helen.simpson@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and CMPO, Bristol<br>Creation-Date: 200703<br>Length: <br>Number: W07/07<br>Abstract: &lt;p&gt;I use within-firm, plant-level data combined with geographic information on firms' overseas operations to examine how investment in low-wage economies affects firms' home-country operations. To remain close to theory I focus on changes in firms' organisational and industrial structure driven by plant closures. As predicted by models of vertical multinationals I find that investment in relatively low-wage economies is associated with plant closures in relatively low-skill, labour-intensive industries in the UK. The findings are of interest in the context of the relaxation of barriers to inward investment in low-wage economies.&lt;/p&gt;<br>Classification-JEL: F2<br>Keywords: Multinational enterprises; skills; wages; globalisation<br>File-URL:http://www.ifs.org.uk/wps/wp0707.pdf<br>File-Format: application/pdf<br>File-Size: 520<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/06<br>Title: Electoral bias and policy choice: theory and evidence<br>Author-Name: Tim Besley<br>Author-X-Name-First: Tim<br>Author-X-Name-Last: Besley<br>Author-Email: t.besley@lse.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and London School of Economics<br>Author-Name: Ian Preston<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Preston<br>Author-Email: i.preston@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200702<br>Length: 44 pp.<br>Number: W07/06<br>Abstract: &lt;p&gt;This paper develops an approach to studying how bias in favor of one party due to the pattern of electoral districting affects policy choice. We tie a commonly used measure of electoral bias to the theory of party competition and show how this affects party strategy in theory. The usefulness of the approach is illustrated using data on local government in England. The results suggest that reducing electoral bias leads parties to moderate their policies.&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0706.pdf<br>File-Format: application/pdf<br>File-Size: 574<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/05<br>Title: The impact of income shocks on health: evidence from cohort data<br>Author-Name: Jerome Adda<br>Author-X-Name-First: Jerome<br>Author-X-Name-Last: Adda<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and European University Institute<br>Author-Name: James Banks<br>Author-X-Name-First: James<br>Author-X-Name-Last: Banks<br>Author-Email: j.banks@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name:  Hans-Martin von Gaudecker<br>Author-X-Name-First: Hans-Martin<br>Author-X-Name-Last:  Gaudecker<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200701<br>Length: 32 pp.<br>Number: W07/05<br>Abstract: &lt;p&gt;&lt;p&gt;We study the effect of permanent income innovations on health for a prime-aged population. Using information on more than half a million individuals sampled over a twenty-five year period in three different cross-sectional surveys we aggregate data by date-of-birth cohort to construct a 'synthetic cohort' dataset with details of income, expenditure, socio-demographic factors, health outcomes and selected risk factors. We then exploit structural and arguably exogenous changes in cohort incomes over the eighties and nineties to uncover causal effects of permanent income shocks on health. We find that such income innovations have little effects on health, but do affect health behaviour and mortality.&lt;/p&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0705.pdf<br>File-Format: application/pdf<br>File-Size: 365<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/04<br>Title: The SES health gradient on both sides of the Atlantic<br>Author-Name: James Banks<br>Author-X-Name-First: James<br>Author-X-Name-Last: Banks<br>Author-Email: j.banks@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name:  Michael Marmot<br>Author-X-Name-First: Michael<br>Author-X-Name-Last:  Marmot<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Zo&euml; Oldfield<br>Author-X-Name-First: Zo&euml;<br>Author-X-Name-Last: Oldfield<br>Author-Email: z.oldfield@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: James Smith<br>Author-X-Name-First: James<br>Author-X-Name-Last: Smith<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and RAND<br>Creation-Date: 200701<br>Length: 53 pp.<br>Number: W07/04<br>Abstract: &lt;p&gt;In this paper we investigate the size of health differences that exist among men in England and the United States and how those differences vary by Socio-Economic Status (SES) in both countries. Three SES measures are emphasized - education, household income, and household wealth - and the health outcomes investigated span multiple dimensions as well. International comparisons have played a central part of the recent debate involving the 'SES health gradient' with some authors citing cross-country differences in levels of income equality and mortality as among the most compelling evidence that unequal societies have negative impacts on individual health outcomes. In spite of the analytical advantages of making such international comparisons, until recently good micro data measuring both SES and health in comparable ways have not been available for both countries. Fortunately, that problem has been remedied with the fielding of two surveys - the Health and Retirement Survey (HRS) and the English Longitudinal Survey of Aging (ELSA). In order to facilitate the type of research represented in this paper, both the health and SES measures in ELSA and HRS were purposely constructed to be as directly comparable as possible.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;Our analysis presents data on some of the most salient issues regarding the social health gradient in health and the manner in which this health gradient differs for men across the two countries in question. There are a several key findings. First, looking across a wide variety of diagnosed diseases, average health status among mature men is much worse in America compared to England, confirming non-gender specific findings we reported in earlier research. Second, there exists a steep negative health gradient for men in both countries where men at the bottom of the economic hierarchy are in much worse health than those at the top. This social health gradient exists whether education, income, or financial wealth is used as the marker of SES. While the negative social gradient in male health characterizes men in both countries, it appears to be steeper in the United States. These central conclusions are maintained even after controlling for a standard set of behavioral risk factors such as smoking, drinking, and obesity and are equally true using either biological measures of disease or individual self-reports.&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;&lt;/p&gt;&lt;p&gt;In contrast to these disease based measures of health, the health of American men appears to be superior to the health of English men when self-reported subjective general health status is used as the measure of health status. This apparent contradiction does not result from differences in co-morbidity, emotional health, or ability to function all of which still point to mature American men being less healthy than their English counterparts. The contradiction most likely stems instead from different thresholds used by Americans and English when evaluation their health status on subjective scales. For the same 'objective' health status, Americans are much more likely to say that their health is good than are the English. Finally, we present preliminary data that indicates that feedbacks from new health events to household income are also one of the reasons that underlie the strength of the income gradient with health in England. Previous research has demonstrated its importance as one of the underlying causes in the United States and these results suggest that that conclusion should most likely be extended to England as well although further research is required on this topic.&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0704.pdf<br>File-Format: application/pdf<br>File-Size: 233<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/03<br>Title: Distributional effects in household models: separate spheres and income pooling<br>Author-Name: Martin Browning<br>Author-X-Name-First: Martin<br>Author-X-Name-Last: Browning<br>Author-Email: martin.browning@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Nuffield College, Oxford<br>Author-Name: Pierre Andr&eacute; Chiappori<br>Author-X-Name-First: Pierre Andr&eacute;<br>Author-X-Name-Last: Chiappori<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Columbia University<br>Author-Name: Val&eacute;rie Lechene<br>Author-X-Name-First: Val&eacute;rie<br>Author-X-Name-Last: Lechene<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200701<br>Length: 13 pp.<br>Number: W07/03<br>Abstract: &lt;p&gt;We derive distributional effects for a non-cooperative alternative to the unitary model of household behaviour. We consider the Nash equilibria of a voluntary contributions to public goods game. Our main result is that, in general, the two partners either choose to contribute to di&curren;erent public goods or they contribute to at most one common good. The former case corresponds to the separate spheres case of Lundberg and Pollak (1993). The second outcome yields (local) income pooling. A household will be in different regimes depending on the distribution of income within the household. Any bargaining model with this non-cooperative case as a breakdown point will inherit the local income pooling. We conclude that targeting benefits such as child benefits to one household member may not always have an effect on outcomes.&lt;/p&gt;<br>Classification-JEL: D10, C71, C72<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0703.pdf<br>File-Format: application/pdf<br>File-Size: 196<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/02<br>Title: University research and the location of business R&amp;D<br>Author-Name: Laura Abramovsky<br>Author-X-Name-First: Laura<br>Author-X-Name-Last: Abramovsky<br>Author-Email: l.abramovsky@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name:  Rupert Harrison<br>Author-X-Name-First: Rupert<br>Author-X-Name-Last:  Harrison<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Helen Simpson<br>Author-X-Name-First: Helen<br>Author-X-Name-Last: Simpson<br>Author-Email: helen.simpson@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and CMPO, Bristol<br>Creation-Date: 200701<br>Length: 45 pp.<br>Number: W07/02<br>Abstract: &lt;p&gt;We investigate the relationship between the location of private sector R&amp;D labs and university research departments in Great Britain. We combine establishment-level data on R&amp;D activity with information on levels and changes in research quality from the Research Assessment Exercise. The strongest evidence for co-location is for pharmaceuticals R&amp;D, which is disproportionately located near to relevant university research, particularly 5 or 5* rated chemistry departments. This relationship is stronger for foreign-owned labs, consistent with multinationals sourcing technology internationally. We also find some evidence for co-location with lower rated research departments in industries such as machinery and communications equipment.&lt;/p&gt;<br>Classification-JEL: O3; R11; R13; I23<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0702.pdf<br>File-Format: application/pdf<br>File-Size: 282<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:07/01<br>Title: Demand properties in household Nash equilibrium<br>Author-Name: Val&eacute;rie Lechene<br>Author-X-Name-First: Val&eacute;rie<br>Author-X-Name-Last: Lechene<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Ian Preston<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Preston<br>Author-Email: i.preston@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200701<br>Length: 33 pp.<br>Number: W07/01<br>Abstract: &lt;p&gt;&lt;p&gt;&lt;b&gt;Please Note:&lt;/b&gt; This paper was updated in July 2007&lt;/p&gt;&lt;p&gt;We study noncooperative household models with two agents and several voluntarily contributed public goods, deriving the counterpart to the Slutsky matrix and demonstrating the nature of the deviation of its properties from those of a true Slutsky matrix in the unitary model. We demonstrate the importance of distinguishing between cases in which there are and are not jointly contributed public goods and provide results characterising both cases. Demand properties are contrasted with those for collective models and conclusions drawn regarding the possibility of empirically testing the collective model against noncooperative alternatives.&lt;/p&gt;&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: D11, C72<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0701.pdf<br>File-Format: application/pdf<br>File-Size: 306<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/27<br>Title: Wage risk and employment risk over the life cycle<br>Author-Name: Hamish Low<br>Author-X-Name-First: Hamish<br>Author-X-Name-Last: Low<br>Author-Email: Hamish.Low@econ.cam.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Trinity College, Cambridge<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name: Luigi Pistaferri<br>Author-X-Name-First: Luigi<br>Author-X-Name-Last: Pistaferri<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Stanford University<br>Creation-Date: 200612<br>Length: 50 pp.<br>Number: W06/27<br>Abstract: &lt;p&gt;This paper decomposes the sources of risk to income that individuals face over their lifetimes. We distinguish productivity risk from employment risk and identify the components of each using the Survey of Income and Program Participation and the Panel Study of Income Dynamics. Estimates of productivity risk contolling for employment risk and for individual labour supply choices are substantially lower than estimates that attribute all wage variation to productivity risk. We use a partial equilibrium life-cycle model of consumption and labour supply to analyse the choices individuals make in the light of these risks and to measure the welfare cost of the different types of risk. Productivity risk induces a considerably greater welfare loss than employment risk primarily because productivity shocks are more persistent. Reflecting this, the welfare value of government programs such as food stamps which partially insure productivity risk is greater than the value of unemployment insurance which provides (partial) insurance against employment risk and no insurance against persistent shocks.&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: D91, H31, J64<br>Keywords: Uncertainty, life-cycle models, unemployment, precautionary savings<br>File-URL:http://www.ifs.org.uk/wps/wp0627.pdf<br>File-Format: application/pdf<br>File-Size: 327<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/26<br>Title: Active labour market policy effects for women in Europe - a survey<br>Author-Name:  Annette Bergemann<br>Author-X-Name-First: Annette<br>Author-X-Name-Last:  Bergemann<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Gerard van den Berg<br>Author-X-Name-First: Gerard<br>Author-X-Name-Last: van den Berg<br>Author-Email: gjvdberg@xs4all.nl<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Mannheim<br>Creation-Date: 200612<br>Length: 21 pp.<br>Number: W06/26<br>Abstract: &lt;p&gt;We survey the recent literature on the effects of active labor market policies on individual labor market outcomes like employment and income, for adult female individuals without work in European countries. We consider skilltraining programs, monitoring and sanctions, job search assistance, and employment subsidies. The results are remarkably uniform across studies. We relate the results to the relevant level of female labor force participation.&lt;/p&gt;<br>Keywords: Job search, female labor supply, wages, unemployment, schooling, training,<br>File-URL:http://www.ifs.org.uk/wps/wp0626.pdf<br>File-Format: application/pdf<br>File-Size: 147<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/25<br>Title: Inequality and income gaps<br>Author-Name: Ian Preston<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Preston<br>Author-Email: i.preston@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200612<br>Length: 30 pp.<br>Number: W06/25<br>Abstract: &lt;p&gt;This paper discusses inequality orderings based explicitly on closing up of income gaps, demonstrating the links between these and other orderings, the classes of functions preserving the orderings and applications showing their usefulness in comparison of economic policies.&lt;/p&gt;<br>Classification-JEL: D31, D63<br>Keywords: Inequality, income distribution<br>File-URL:http://www.ifs.org.uk/wps/wp0625.pdf<br>File-Format: application/pdf<br>File-Size: 307<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/24<br>Title: Employment, innovation and productivity: evidence from Italian microdata<br>Author-Name: Bronwyn Hall<br>Author-X-Name-First: Bronwyn<br>Author-X-Name-Last: Hall<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University of California, Berkeley<br>Author-Name:  Francesca Lotti<br>Author-X-Name-First: Francesca<br>Author-X-Name-Last:  Lotti<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Jacques Mairesse<br>Author-X-Name-First: Jacques<br>Author-X-Name-Last:  Mairesse<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200611<br>Length: 40 pp.<br>Number: W06/24<br>Abstract: Italian manufacturing firms have been losing ground with respect to many of their European competitors. This paper presents some empirical evidence on the effects of innovation on employment growth and therefore on firms' productivity with the goal of understanding the roots of such poor performance. We use firm level data from the last three surveys on Italian manufacturing firms conducted by Mediocredito-
Capitalia, which cover the period 1995-2003. Using a modified version of the model proposed by Harrison, Jaumandreu, Mairesse and Peters (2005), which separates employment growth rates into those associated with old and new products, we provide robust evidence that there is no employment displacement effect stemming from process innovation. The sources of employment growth during the period are split equally between the net contribution of product innovation and the net contribution from sales growth of old products. However, the contribution of product
innovation is somewhat lower than that for the four comparison European countries considered by Harrison et al.<br>Classification-JEL: L60, O31, O33<br>Keywords: Innovation, employment, productivity, Italy.<br>File-URL:http://www.ifs.org.uk/wps/wp0624.pdf<br>File-Format: application/pdf<br>File-Size: 326<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/23<br>Title: R&amp;D, productivity and market value<br>Author-Name: Bronwyn Hall<br>Author-X-Name-First: Bronwyn<br>Author-X-Name-Last: Hall<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University of California, Berkeley<br>Creation-Date: 200611<br>Length: 47 pp.<br>Number: W06/23<br>Abstract: Measuring the private returns to R&amp;D requires knowledge of its private depreciation or obsolescence rate, which is inherently variable and responds to competitive pressure. Nevertheless, most of the previous literature has used a constant depreciation rate to construct R&amp;D capital stocks and measure the returns to R&amp;D, a rate usually equal to 15 per cent. In this paper I review the implications of this assumption for the measurement of returns using two different methodologies: one based on the production function and another that uses firm market value to infer returns. Under the assumption that firms choose their R&amp;D investment optimally, that is, marginal expected benefit equals marginal cost, I show that both estimates of returns can be inverted to derive an implied depreciation rate for R&amp;D capital. I then test these ideas on a large unbalanced panel of US manufacturing firms for the years 1974 to 2003. The two methods do not agree, in that the production function approach suggests depreciation rates near zero (or even appreciation) whereas the market value approach implies depreciation rates ranging from 20 to 50 per cent, depending on the period. The concluding section discusses the possible reasons why this is true.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0623.pdf<br>File-Format: application/pdf<br>File-Size: 681<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/22<br>Title: Incentives and managerial experience in multi-task teams: evidence from within a firm<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name:  Andrew Neely<br>Author-X-Name-First: Andrew<br>Author-X-Name-Last:  Neely<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200611<br>Length: 41 pp.<br>Number: W06/22<br>Abstract: This paper exploits a quasi-experimental setting to estimate the impact that a multi-dimensional group incentive scheme had on branch performance in a large distribution firm. The scheme, which is based on the Balanced Scorecard, was implemented in all branches in one division, but not in another. Branches from the
second division are used as a control group. Our results suggest that the balanced scorecard had some impact, but that it varied with branch characteristics, and in particular, branches with more experienced managers were better able to respond to the new incentives.<br>Keywords: Incentive design, balanced scorecard, managerial experience<br>File-URL:http://www.ifs.org.uk/wps/wp0622.pdf<br>File-Format: application/pdf<br>File-Size: 272<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/21<br>Title: Measurement errors in recall food consumption data<br>Author-Name:  Naeem Ahmed<br>Author-X-Name-First: Naeem<br>Author-X-Name-Last:  Ahmed<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Matthew Brzozowski<br>Author-X-Name-First: Matthew<br>Author-X-Name-Last:  Brzozowski<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Thomas Crossley<br>Author-X-Name-First: Thomas<br>Author-X-Name-Last: Crossley<br>Author-Email:  tfc22@cam.ac.uk <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Cambridge<br>Creation-Date: 200610<br>Length: 41 pp.<br>Number: W06/21<br>Abstract: Recall food consumption data, which is the basis of a great deal of empirical work, is believed to suffer from considerable measurement error. Diary records are believed to be very accurate. We study a unique data set that collects recall and diary data from the same households. Measurement errors in recall food consumption data appear to be substantial, and they do not have the properties of classical measurement error. We also find evidence that the diary measures are themselves imperfect. We consider the implications of our findings for modelling demand, measuring inequality, and estimating inter-temporal preference parameters. Keywords: expenditure, consumption, measurement error, survey data<br>Classification-JEL: C81, D12<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0621.pdf<br>File-Format: application/pdf<br>File-Size: 463<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/20<br>Title: Financial work incentives in Britain: comparisons over time and between family types<br>Author-Name: Stuart Adam<br>Author-X-Name-First: Stuart<br>Author-X-Name-Last: Adam<br>Author-Email: s.adam@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Mike Brewer<br>Author-X-Name-First: Mike<br>Author-X-Name-Last: Brewer<br>Author-Email: m.brewer@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and ISER, Essex University<br>Author-Name: Andrew Shephard<br>Author-X-Name-First: Andrew<br>Author-X-Name-Last: Shephard<br>Author-Email: a.shephard@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200610<br>Length: 74 pp.<br>Number: W06/20<br>Abstract: This paper reviews various techniques for quantifying financial incentives to work, shows how financial work incentives have changed across the population since 1979, and estimates how much of these changes are due to changes in the tax and benefit system.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0620.pdf<br>File-Format: application/pdf<br>File-Size: 960<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/19<br>Title: Estimating a collective household model with survey data on financial satisfaction<br>Author-Name:  Rob Alessie<br>Author-X-Name-First: Rob<br>Author-X-Name-Last:  Alessie<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Thomas Crossley<br>Author-X-Name-First: Thomas<br>Author-X-Name-Last: Crossley<br>Author-Email:  tfc22@cam.ac.uk <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Cambridge<br>Author-Name:  Vincent Hildebrand<br>Author-X-Name-First: Vincent<br>Author-X-Name-Last:  Hildebrand<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200609<br>Length: 48 pp.<br>Number: W06/19<br>Abstract: We estimate a collective household model with survey data on financial satisfaction from the European Community Household Panel. Our estimates suggest that cohabitating individuals enjoy returns to scale in consumption that are towards the larger end of the range of estimates reported in the literature. They also suggest that the share of household income provided by the female partner is a significant determinant of her share
of household consumption in most countries of the countries we study.<br>Classification-JEL: D12, D13, I31<br>Keywords: Consumption, returns to scale, collective household models<br>File-URL:http://www.ifs.org.uk/wps/wp0619.pdf<br>File-Format: application/pdf<br>File-Size: 380<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/18<br>Title: Giving children a better start: preschool attendance and school-age profiles<br>Author-Name: Samuel Berlinski<br>Author-X-Name-First: Samuel<br>Author-X-Name-Last: Berlinski<br>Author-Email: samuelb@iadb.org<br>Author-Workplace-Name: Institute for Fiscal Studies and University College, London<br>Author-Name:  Sebastian Galiani<br>Author-X-Name-First: Sebastian<br>Author-X-Name-Last:  Galiani<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Marco Manacorda<br>Author-X-Name-First: Marco<br>Author-X-Name-Last:  Manacorda<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200609<br>Length: 32 pp.<br>Number: W06/18<br>Abstract: We study the effect of pre-primary education on children's subsequent school outcomes by exploiting a unique feature of the Uruguayan household survey (ECH) that collects retrospective information on preschool attendance. A rapid expansion in the supply of pre-primary places over the last decade generates sufficient variation in the data to warrant identification. Using a within household estimator that only exploits differences in exposure across siblings, we find small gains from preschool attendance at early ages that magnify as children grow up. By age 16, children that attended preschool have accumulated more than 1 extra year of education and are 27 percentage points more likely to be in school compared to their siblings with no preschool education. We speculate that early grade repetition harms subsequent school progression and that pre-primary education appears as a successful policy option to prevent early grade failure and its long lasting consequences.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0618.pdf<br>File-Format: application/pdf<br>File-Size: 205<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/17<br>Title: Product market reform and innovation in the EU<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name:  Rupert Harrison<br>Author-X-Name-First: Rupert<br>Author-X-Name-Last:  Harrison<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Helen Simpson<br>Author-X-Name-First: Helen<br>Author-X-Name-Last: Simpson<br>Author-Email: helen.simpson@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and CMPO, Bristol<br>Creation-Date: 200609<br>Length: 31 pp.<br>Number: W06/17<br>Abstract: European Union countries have implemented widespread reforms to product markets in order to stimulate competition, innovation and economic growth. We provide empirical evidence that the reforms carried out under the EU Single Market Programme (SMP) were associated with increased product market competition, as measured by a
reduction in average profitability, and with a subsequent increase in innovation intensity
and productivity growth for manufacturing sectors. In our analysis we exploit exogenous variation in the expected impact of the SMP across countries and industries to identify the effects of reforms on average profitability, and the effects of profitability on innovation and productivity growth.<br>Classification-JEL: L1, O31, O47<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0617.pdf<br>File-Format: application/pdf<br>File-Size: 166<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/16<br>Title: Career progression and formal versus on-the-job training<br>Author-Name: Jerome Adda<br>Author-X-Name-First: Jerome<br>Author-X-Name-Last: Adda<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and European University Institute<br>Author-Name: Christian Dustmann<br>Author-X-Name-First: Christian<br>Author-X-Name-Last: Dustmann<br>Author-Email: c.dustmann@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name: Jean-Marc Robin<br>Author-X-Name-First: Jean-Marc<br>Author-X-Name-Last: Robin<br>Author-Email: jmrobin@univ-paris1.fr<br>Author-Workplace-Name: Institute for Fiscal Studies and EUREQua, University of Paris 1<br>Creation-Date: 200608<br>Length: <br>Number: W06/16<br>Abstract: We develop a dynamic discrete choice model of training choice, employment and wage growth, allowing for job mobility, in a world where wages depend on firm-worker matches, as well as experience and tenure and jobs take time to locate. We estimate this model on a large administrative panel data set which traces labour market transitions, mobility across firms and wages from the end of statutory schooling. We use the model to evaluate the life-cycle return to apprenticeship training and find that on average the costs outweigh the benefits; however for those who choose to train the returns are positive. We then use our model to consider the long-term lifecycle effects of two reforms: One is the introduction of an Earned
Income Tax Credit in Germany, and the other is a reform to Unemployment Insurance. In both reforms we find very significant impacts of the policy on training choices and on the value of realised matches, demonstrating the importance of considering such longer term implications.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0616.pdf<br>File-Format: application/pdf<br>File-Size: 404<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/15<br>Title: A review of static and dynamic models of labour supply and labour market transitions<br>Author-Name: Michal Myck<br>Author-X-Name-First: Michal<br>Author-X-Name-Last: Myck<br>Author-Email: see DIW-Berlin website: <a href="http://www.diw.de">www.diw.de</a>@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and DIW-Berlin<br>Author-Name: Howard Reed<br>Author-X-Name-First: Howard<br>Author-X-Name-Last: Reed<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200608<br>Length: 118 pp.<br>Number: W06/15<br>Abstract: This paper aims to review the techniques and methods which have been 
developed by researchers to study labour supply and employment, 
unemployment and inactivity in the labour market. Progress in labour 
supply modelling in the last thirty years or so has been considerable. 
Firstly, the theory of labour supply has become much more 
sophisiticated; simple static-period models of the budget constraint and 
the hours decision have been augmented with new developments such as 
intertemporal optimisation, explicit treatment of the participation 
decision as distinct from the hours decision, and search theory. 
Secondly, the econometric techniques available to estimate these more 
advanced models on the data have expanded massively, along with 
increases in the amount and quality of data available and huge 
improvements in computing power. In this report we aim to provide a 
comprehensive survey of the state of the art in the field of labour 
supply estimation.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0615.pdf<br>File-Format: application/pdf<br>File-Size: 785<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/14<br>Title: State pensions and the well-being of the elderly in the UK<br>Author-Name: James Banks<br>Author-X-Name-First: James<br>Author-X-Name-Last: Banks<br>Author-Email: j.banks@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Zo&euml; Oldfield<br>Author-X-Name-First: Zo&euml;<br>Author-X-Name-Last: Oldfield<br>Author-Email: z.oldfield@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200608<br>Length: 53 pp.<br>Number: W06/14<br>Abstract: This paper presents the trends seen over the last quarter of the 20th Century in various indicators of the well-being of the elderly alongside those seen for the young. Specifically we look at measures of both the level and distribution of income and expenditure, and self-reported measures of life satisfaction and health. We then exploit the substantial reforms to the UK pension system over this period to examine the impact of reforms to state pensions on these outcomes. We find that increases in the generosity of state pensions have led to increased incomes of the elderly and reductions in measures of both relative and absolute income poverty. We also find that increased state pensions have led to increased expenditure by the elderly. It is perhaps not surprising that in the UK the reforms to the generosity of state pensions have affected outcomes among the elderly (instead of being fully offset by individuals when they were younger) given that often very little (pre-retirement) notice was given, and that some of the reforms were of a substantial magnitude.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0614.pdf<br>File-Format: application/pdf<br>File-Size: 497<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/13<br>Title: Child education and work choices in the presence of a conditional cash transfer programme in rural Colombia<br>Author-Name: Orazio Attanasio<br>Author-X-Name-First: Orazio<br>Author-X-Name-Last: Attanasio<br>Author-Email: o.attanasio@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Emla Fitzsimons<br>Author-X-Name-First: Emla<br>Author-X-Name-Last: Fitzsimons<br>Author-Email: e.fitzsimons@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name:  Ana Gomez<br>Author-X-Name-First: Ana<br>Author-X-Name-Last:  Gomez<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Martha Isabel Guti&eacute;rrez<br>Author-X-Name-First: Martha<br>Author-X-Name-Last:  Guti&eacute;rrez<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name: Alice Mesnard<br>Author-X-Name-First: Alice<br>Author-X-Name-Last: Mesnard<br>Author-Email: a.mesnard@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200607<br>Length: pp. 35<br>Number: W06/13<br>Abstract: &lt;p&gt;&lt;p&gt;The paper studies the effects of Familias en Acci&oacute;n, a conditional cash transfer programme implemented in rural areas in Colombia in 2002, on school enrolment and child labour. Using a quasi-experimental approach, our methodology makes use of an interesting feature of the data, which allows us to identify anticipation effects. Our results show that the programme increased school participation of 14 to 17 year old children quite substantially, by between 5 and 7 percentage points, and had lower, but non-negligible effects on enrolment of younger children of between around 1.5 and 2.5 percentage points. In terms of work, the effects are generally largest for younger children whose participation in domestic work decreased by around 10 to 12 percentage points after the programme but whose participation in income-generating work remained largely unaffected by the programme. We also find evidence of school and work time not being fully substitutable, suggesting that some, but not all, of the increased time at school may be drawn from children's leisure time.&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: I28, I38, J22, O15<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0613.pdf<br>File-Format: application/pdf<br>File-Size: 474<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/12<br>Title: The U-shaped relationship between vertical integration and competition: theory and evidence<br>Author-Name: Philippe Aghion<br>Author-X-Name-First: Philippe<br>Author-X-Name-Last: Aghion<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Harvard University<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Peter Howitt<br>Author-X-Name-First: Peter<br>Author-X-Name-Last: Howitt<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Brown University<br>Creation-Date: 200606<br>Length: 16 pp.<br>Number: W06/12<br>Abstract: This paper considers how competition can affect aggregate innovative activity through its effects on firms' decision whether or not to vertically integrate. A moderate increase in competition enhances innovation incentives, too much competition discourages innovative effort. These effects generates an inverted-U relationship between competition and innovation and between competition and the incentive to vertically integrate. Preliminary evidence finds that there is a non-linear relationship between competition and the propensity of firms to vertically integrate. These results seem to be more consistent with the Property Right Theory (PRT) of vertical integration than with the Transaction Cost Economics (TCE)
approach.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0612.pdf<br>File-Format: application/pdf<br>File-Size: 352<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/11<br>Title: The long-term educational cost of war: evidence from landmine contamination in Cambodia<br>Author-Name:  Ouarda Merrouche<br>Author-X-Name-First: Ouarda<br>Author-X-Name-Last:  Merrouche<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200606<br>Length: 17 pp.<br>Number: W06/11<br>Abstract: The economic impact of war may be visible in the long run and particularly its impact
on human capital. I use unique district level data on landmine contamination intensity
in Cambodia combined with individual survey data to evaluate the long run cost of Cambodia's 30 years war (1970-1998) on education levels and earnings. These effects are
identified using difference-in-differences (DD) and instrumental variables (IV) estimators.
In the DD framework I exploit two sources of variation in an individual's exposure to the
conflict: her age in 1970 and landmine contamination intensity in her district of residence.
The IV specification uses an indicator of distance to the Thai border-average district
fluency in Thai- as an exogenous source of variation in landmine contamination intensity.
I show that young individuals who had not yet attended school before 1970 received less
education (relative to the older cohort) and this effect was higher in regions where conflict
has been more intense. However, immediately after the war there are no visible effects on
earnings. I argue that the destruction of physical capital is the major factor that drives
down the returns to education in Cambodia post-war.<br>Classification-JEL: O1, O55<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0611.pdf<br>File-Format: application/pdf<br>File-Size: 454<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/10<br>Title: The social cost-of-living: welfare foundations and estimation<br>Author-Name: Thomas Crossley<br>Author-X-Name-First: Thomas<br>Author-X-Name-Last: Crossley<br>Author-Email:  tfc22@cam.ac.uk <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Cambridge<br>Author-Name: Krishna Pendakur<br>Author-X-Name-First: Krishna<br>Author-X-Name-Last: Pendakur<br>Author-Email: pendakur@sfu.ca<br>Author-Workplace-Name: Institute for Fiscal Studies and Simon Fraser University<br>Creation-Date: 200606<br>Length: 34 pp.<br>Number: W06/10<br>Abstract: We present a new class of social cost-of-living indices and a nonparametric framework for
estimating these and other social cost-of-living indices. Common social cost-of-living indices
can be understood as aggregator functions of approximations of individual cost-of-living
indices. The Consumer Price Index (CPI) is the expenditure-weighted average of first-order
approximations of each individual's cost-of-living index. This is troubling for three reasons.
First, it has not been shown to have a welfare economic foundation for the case where agents
are heterogeneous (as they clearly are.) Second, it uses an expenditure-weighted average
which downweights the experience of poor households relative to rich households. Finally,
it uses only first-order approximations of each individual's cost-of-living index, and thus
ignores substitution effects.</p>
<p>We propose a 'common-scaling' social cost-of-living index, which is defined as the single
scaling to everyone's expenditure which holds social welfare constant across a price change.
Our approach has an explicit social welfare foundation and allows us to choose the weights
on the costs of rich and poor households. We also give a unique solution for the welfare
function for the case where the weights are independent of household expenditure. A first
order approximation of our social cost-of-living index nests as special cases commonly used
indices such as the CPI. We also provide a nonparametric method for estimating second-order
approximations (which account for substitution effects).<br>Classification-JEL: D11, D12, D63, E31<br>Keywords: Inflation, social cost-of-living, demand, average derivatives<br>File-URL:http://www.ifs.org.uk/wps/wp0610.pdf<br>File-Format: application/pdf<br>File-Size: 483<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/09<br>Title: The importance of incentives in influencing private retirement saving: known knowns and known unknowns<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Matthew Wakefield<br>Author-X-Name-First: Matthew<br>Author-X-Name-Last: Wakefield<br>Author-Email: m.wakefield@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Bologna<br>Creation-Date: 200604<br>Length: <br>Number: W06/09<br>Abstract: &lt;p&gt;&lt;p&gt;We summarise what economic theory predicts about how retirement savings decisions are affected by marginal withdrawal rates created by the tax, tax credit and benefit system, and by the information individuals are provided with. All these predictions vary across individuals with their circumstances.&lt;/p&gt;&lt;ul&gt;&lt;li&gt;In documenting the incentives to save in a private pension provided by the tax, tax credit and benefit system we show that some individuals face a very strong incentive to place funds in a private pension at particular times during their working lives. Those who are basic rate taxpayers who expect to become higher rate taxpayers or move onto the taper of the Working Tax Credit have an incentive to delay making any private pension contributions until that time, while those expecting to move off that taper have an incentive to bring forward future pension contributions.&lt;li&gt;When examining retirement saving it is important to consider both saving decisions and also the choice of retirement age. We cite previous evidence that both of these margins have been adjusted by individuals in the light of changed financial incentives. In particular there is evidence that spending by working age individuals was increased in the light of the introduction of the State Earnings-Related Pension Scheme. In addition evidence from West Germany and the United States shows that individuals' retirement ages can be affected substantially by changing financial incentives. There is less evidence of reduced spending by working age individuals in the light of the decision to index the Basic State Pension in line  with prices rather than the greater of prices or earnings.&lt;li&gt;New evidence from the English Longitudinal Study of Ageing shows that it is low and high wealth individuals who are most likely to be out of the labour market prior to the State Pension Age, though often for very different stated reasons. This suggests that if retirement incomes of those with low wealth are to be increased then increased labour market participation is perhaps a margin for them to adjust.&lt;li&gt;Incentives to work and save are potentially affected by two recent UK reforms: the introduction of the two new tax credits (Working Tax Credit and Child Tax Credit) and the introduction of the Pension Credit. We present some preliminary evidence on whether the strong incentive to contribute to a private pension provided by the two new tax credits has boosted private pension participation, the results of which are somewhat inconclusive and are worthy of further research.&lt;li&gt;Examining the distribution of current pensioner incomes with respect to the incentives induced by the Pension Credit reform we find that many single pensioners will see an unambiguous increase in the incentive to increase their private retirement income - for example through increased saving or later retirement. There are still large numbers of single pensioners who see a reduction in the incentive to increase  their retirement income, the majority of whom have private income which they might decide to reduce. Fewer individuals in pensioner couples are eligible for the Pension Credit. Despite this we find that a similar proportion faces a reduced incentive to acquire greater income as we did for single pensioners.&lt;li&gt;If the expectations of individuals do not reflect the current rules of the system, then we cannot expect to observe responses fully in line with economic theory that is predicated on full information. Recent evidence  from the English Longitudinal Study of Ageing suggests that on average individuals underestimate  their longevity and overestimate the private pension income that they can expect to receive. On the other hand, expectations of being in paid employment at older ages are, on average, similar to the current proportions of older individuals who are in paid work and individuals' expectations of remaining in the labour market at older ages appear to square up with the marginal financial incentives to remain in work that are created by different types of pension scheme.&lt;/li&gt;&lt;/ul&gt;&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0609.pdf<br>File-Format: application/pdf<br>File-Size: 531<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/08<br>Title: Dynamic models for policy evaluation<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Creation-Date: 200603<br>Length: 42 pp.<br>Number: W06/08<br>Abstract: The evaluation of interventions has become a commonly used policy tool, which is frequently adopted to improve the transparency and effectiveness of public policy. However, evaluation methods based on comparing treatment and control groups in small scale trials are not capable of providing a complete picture of the likely effects of a policy and do not provide a framework which allows issues relating to the design of the programme to be addressed. The longer term effects relate to decisions by individuals to change aspects of their life-cycle behavior not directly targeted by the intervention, so as to best take into account of its presence. They also relate to possible changes in prices that may change or even reverse the incentives designed by the programme. In this paper we show how experimental data from field trials can be used to enhance the evaluation of interventions and we also illustrate the potential importance of allowing for longer term incentive and General Equilibrium effects.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0608.pdf<br>File-Format: application/pdf<br>File-Size: 472<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/07<br>Title: The economic consequences of being left-handed: some sinister results<br>Author-Name: Kevin Denny<br>Author-X-Name-First: Kevin<br>Author-X-Name-Last: Denny<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College Dublin<br>Author-Name:  Vincent O'Sullivan<br>Author-X-Name-First: Vincent<br>Author-X-Name-Last:  O'Sullivan<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200603<br>Length: 35 pp.<br>Number: W06/07<br>Abstract: This paper provides the first estimates of the effects of handedness on hourly earnings. Augmenting a conventional earnings equation with an indicator of left handedness shows there is a well determined positive effect on male earnings with non-manual workers enjoying a slightly larger premium.
These results are inconsistent with the view that left-handers in general are
in some sense handicapped either innately or through experiencing a world
geared towards right-handers. The results for females however reveal the
opposite, left-handed females are paid significantly less. This is consistent
with some psychological evidence which suggests that left-hander males have particular talents such as enhanced creativity and some evidence on
brain morphology which also suggests advantages for left-handed males.<br>Keywords: Earnings, brain, left-handed, laterality<br>File-URL:http://www.ifs.org.uk/wps/wp0607.pdf<br>File-Format: application/pdf<br>File-Size: 432<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/06<br>Title: Product market reforms, labour market institutions and unemployment<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name:  Rupert Harrison<br>Author-X-Name-First: Rupert<br>Author-X-Name-Last:  Harrison<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Gareth Macartney<br>Author-X-Name-First: Gareth<br>Author-X-Name-Last: Macartney<br>Author-Email: gareth_m@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200603<br>Length: 39 pp.<br>Number: W06/06<br>Abstract: <p>We analyze the impact of product market competition on unemployment and wages, and how this depends on labour market institutions. We use differential changes in regulations across OECD countries over the 1980s and 1990s to identify the  effects of competition. We find that increased product market competition reduces unemployment, and that it does so more in countries with labour market institutions that increase worker bargaining power. The theoretical intuition is that both firms with market power and unions with bargaining power are constrained in their behaviour by the elasticity of demand in the product market. We also find that the effect of increased competition on real wages is beneficial to workers, but less so when they have high bargaining power. Intuitively, real wages increase through a drop in the general price level, but workers with bargaining power lose out somewhat from a reduction in the rents that they had previously captured.</p><br>Classification-JEL: E24, J50, L50<br>Keywords: Product market regulation; competition; wage bargaining; unemployment.<br>File-URL:http://www.ifs.org.uk/wps/wp0606.pdf<br>File-Format: application/pdf<br>File-Size: 654<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/05<br>Title: Understanding pensions: cognitive function, numerical ability and retirement saving<br>Author-Name: James Banks<br>Author-X-Name-First: James<br>Author-X-Name-Last: Banks<br>Author-Email: j.banks@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Zo&euml; Oldfield<br>Author-X-Name-First: Zo&euml;<br>Author-X-Name-Last: Oldfield<br>Author-Email: z.oldfield@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200603<br>Length: 30 pp.<br>Number: W06/05<br>Abstract: As the degree to which individuals are expected to provide their own resources for retirement increases, there is a correspondingly increasing importance of individuals being able to understand the financial choices they face and to choose savings products, portfolios and contribution rates accordingly. In this paper we look at numerical ability and other dimensions of cognitive function in a sample of older adults in England and examine the extent to which these abilities are correlated with various measures of
wealth and retirement saving outcomes. The key findings are:</p>
<p>a) Relatively large fractions of the population can be seen to have relatively low levels of financial numeracy and these numeracy levels decline systematically with age.</p>
<p>b) Numeracy levels are correlated with measures of retirement saving and investment
portfolios, even when we control for other cognitive ability and education.</p>
<p>c) Numeracy is correlated with knowledge and understanding of pension arrangements,
and with perceived financial security, even when we control for other cognitive ability,
education and the level of overall retirement saving.</p>
<p>The lessons of our analysis are threefold, even though at this point we have only crosssectional data available on which to base our analysis. Firstly, it shows yet another
dimension in which inequalities amongst older individuals are apparent. Second, the
analysis suggests that in the short run there may be a role for targeting simple retirement
planning information at low numeracy, low wealth, low education groups. Third, it suggests that a longer run policy goal might want to target numeracy levels more generally in order to reduce the fraction of the population with low basic skills. Whether such a policy would have knock on effects on to retirement planning arrangements,
however, is a more difficult question to answer on the basis of the conditional
correlations we present here. On this topic in particular, there is much further work to be
done.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0605.pdf<br>File-Format: application/pdf<br>File-Size: 522<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/04<br>Title: The effect of pre-primary education on primary school performance<br>Author-Name: Samuel Berlinski<br>Author-X-Name-First: Samuel<br>Author-X-Name-Last: Berlinski<br>Author-Email: samuelb@iadb.org<br>Author-Workplace-Name: Institute for Fiscal Studies and University College, London<br>Author-Name:  Sebastian Galiani<br>Author-X-Name-First: Sebastian<br>Author-X-Name-Last:  Galiani<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Paul Gertler<br>Author-X-Name-First: Paul<br>Author-X-Name-Last:  Gertler<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200603<br>Length: 38 pp.<br>Number: W06/04<br>Abstract: Although the theoretical case for universal pre-primary education is strong, the empirical foundation is weak. In this paper, we contribute to the empirical case by investigating the effect of a large expansion of universal pre-primary education on subsequent primary school performance in Argentina. We estimate that one year of preprimary school increases average third grade test scores by 8 percent of a mean or by 23
percent of the standard deviation of the distribution of test scores. We also find that preprimary school attendance positively affects student's self-control in the third grade as
measured by behaviors such as attention, effort, class participation, and discipline.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0604.pdf<br>File-Format: application/pdf<br>File-Size: 519<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/03<br>Title: Electoral bias and policy choice: theory and evidence<br>Author-Name: Tim Besley<br>Author-X-Name-First: Tim<br>Author-X-Name-Last: Besley<br>Author-Email: t.besley@lse.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and London School of Economics<br>Author-Name: Ian Preston<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Preston<br>Author-Email: i.preston@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200601<br>Length: 41 pp.<br>Number: W06/03<br>Abstract: This paper develops a new approach to study how electoral bias in favor of one party due to the pattern of districting affects policy choice. We tie a commonly used measure of districting bias to the theory of party competition and show how this affects policy choice in theory. The utility of the approach is illustrated using data on local government in the U.K. The results suggest that reducing electoral bias leads parties to moderate their policies.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0603.pdf<br>File-Format: application/pdf<br>File-Size: 514<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/02<br>Title: Testing for adverse selection into private medical insurance<br>Author-Name:  Pau Olivella<br>Author-X-Name-First: Pau<br>Author-X-Name-Last:  Olivella<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Marcos Vera-Hernandez<br>Author-X-Name-First: Marcos<br>Author-X-Name-Last: Vera-Hernandez<br>Author-Email: m.vera@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200601<br>Length: 48 pp.<br>Number: W06/02<br>Abstract: We develop a test for adverse selection and use it to examine private health insurance markets. In contrast to earlier papers that consider a
purely private system or a system in which private insurance supplements a public system, we focus our attention on a system where privately funded
health care is substitutive of the publicly funded one. Using a model of
competition among insurers, we generate predictions about the correlation
between risk and the probability of taking private insurance under both
symmetric information and adverse selection. These predictions constitute
the basis for our adverse selection test. The theoretical model is also useful
to conclude that the setting that we focus on is especially attractive to test for adverse selection. Using the British Household Panel Survey, we find evidence that adverse selection is present in this market.<br>Classification-JEL: D82, I19, G22<br>Keywords: Contract theory, Testing, Health Insurance<br>File-URL:http://www.ifs.org.uk/wps/wp0602.pdf<br>File-Format: application/pdf<br>File-Size: 656<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:06/01<br>Title: Child education and work choices in the presence of a conditional cash transfer programme in rural Colombia<br>Author-Name: Orazio Attanasio<br>Author-X-Name-First: Orazio<br>Author-X-Name-Last: Attanasio<br>Author-Email: o.attanasio@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Emla Fitzsimons<br>Author-X-Name-First: Emla<br>Author-X-Name-Last: Fitzsimons<br>Author-Email: e.fitzsimons@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name:  Ana Gomez<br>Author-X-Name-First: Ana<br>Author-X-Name-Last:  Gomez<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Diana Lopez<br>Author-X-Name-First: Diana<br>Author-X-Name-Last:  Lopez<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name: Alice Mesnard<br>Author-X-Name-First: Alice<br>Author-X-Name-Last: Mesnard<br>Author-Email: a.mesnard@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200601<br>Length: 28 pp.<br>Number: W06/01<br>Abstract: This research is part of a large evaluation effort, undertaken by a consortium formed by IFS, Econometria and SEI, which has considered the effects of Familias en Acci&oacute;n on a variety of outcomes one year after its implementation. In early reports, we focussed on the effects of the programme on school enrolment. In this paper, we both expand those results, by carefully analysing anticipation effects along with other issues, and complement them with an analysis of child labour - both paid and unpaid (including domestic) work. The child labour analysis is made possible due to a rich time use module of the surveys that has not previously been analysed.  We find that the programme increased the school participation rates of 14 to 17 year old children quite substantially, by between 5 and 7 percentage points, and had lower, but non-negligible effects on the enrolment of younger children of between 1.4 and 2.4 percentage points. In terms of work, the effects are generally largest for younger children whose participation in domestic work decreased by around 10 to 12 percentage points after the programme but whose participation in income-generating work remained largely unaffected by the programme. We also find evidence of school and work time not being fully substitutable, suggesting that some, but not all, of the increased time at school may be drawn from children's leisure time.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0601.pdf<br>File-Format: application/pdf<br>File-Size: 502<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/25<br>Title: Is the elasticity of intertemporal substitution constant? <br>Author-Name: Thomas Crossley<br>Author-X-Name-First: Thomas<br>Author-X-Name-Last: Crossley<br>Author-Email:  tfc22@cam.ac.uk <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Cambridge<br>Author-Name: Hamish Low<br>Author-X-Name-First: Hamish<br>Author-X-Name-Last: Low<br>Author-Email: Hamish.Low@econ.cam.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Trinity College, Cambridge<br>Creation-Date: 200511<br>Length: 24 pp.<br>Number: W05/25<br>Abstract: &lt;p&gt;&lt;p&gt;This paper shows that a power utility specification of preferences over total expenditure (ie. CRRA preferences) implies that intratemporal demands are in the PIGL/PIGLOG class. This class generates (at most) rank two demand systems and we can test the validity of power utility on cross-section data. Further, if we maintain the assumption of power utility, and within period preferences are not homothetic, then the intertemporal preference parameter is identified by the curvature of Engel curves. Under the power utility assumption, neither Euler equation estimation nor structural consumption function estimation is necessary to identify the power parameter. In our empirical work, we use demand data to estimate the power utility parameter and to test the assumption of the power utility representation. We find estimates of the power parameter larger than obtained from Euler equation estimation, but we reject the power specification of within period utility.&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: D91, E21, D12<br>Keywords: Elasticity of intertemporal substitution, Euler equation estimation, demand systems<br>File-URL:http://www.ifs.org.uk/wps/wp0525.pdf<br>File-Format: application/pdf<br>File-Size: 448<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/24<br>Title: Booms and busts: consumption, house prices and expectations<br>Author-Name: Orazio Attanasio<br>Author-X-Name-First: Orazio<br>Author-X-Name-Last: Attanasio<br>Author-Email: o.attanasio@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Laura Blow<br>Author-X-Name-First: Laura<br>Author-X-Name-Last: Blow<br>Author-Email: l.blow@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name:  Robert Hamilton<br>Author-X-Name-First: Robert<br>Author-X-Name-Last:  Hamilton<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Andrew Leicester<br>Author-X-Name-First: Andrew<br>Author-X-Name-Last: Leicester<br>Author-Email: a.leicester@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200511<br>Length: 39 pp.<br>Number: W05/24<br>Abstract: Over much of the past 25 years, the cycles of house price and consumption growth have been closely
synchronised. Three main hypotheses for this co-movement have been proposed in the literature.
First, that an increase in house prices raises households' wealth, particularly for those in a position to
trade down the housing ladder, which increases their desired level of expenditure. Second, that
house price growth increases the collateral available to homeowners, reducing credit constraints and
thereby facilitating higher consumption. And third, that house prices and consumption have tended
to be influenced by common factors. This paper finds that the relationship between house prices and consumption is stronger for younger than older households, which appears to contradict the wealth channel. These findings therefore suggest that common causality has been the most important factor
behind the link between house price and consumption.<br>Classification-JEL: C13, D10, D91, E21<br>Keywords: House prices, consumption booms, wealth effects, collateral effects, common causality<br>File-URL:http://www.ifs.org.uk/wps/wp0524.pdf<br>File-Format: application/pdf<br>File-Size: 673<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/23<br>Title: Understanding co-operative R&amp;D activity: evidence from four European countries<br>Author-Name: Laura Abramovsky<br>Author-X-Name-First: Laura<br>Author-X-Name-Last: Abramovsky<br>Author-Email: l.abramovsky@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name:  Elisabeth Kremp<br>Author-X-Name-First: Elisabeth<br>Author-X-Name-Last:  Kremp<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Alberto L&oacute;pez<br>Author-X-Name-First: Alberto<br>Author-X-Name-Last:  L&oacute;pez<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Tobias Schmidt<br>Author-X-Name-First: Tobias<br>Author-X-Name-Last:  Schmidt<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Helen Simpson<br>Author-X-Name-First: Helen<br>Author-X-Name-Last: Simpson<br>Author-Email: helen.simpson@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and CMPO, Bristol<br>Creation-Date: 200510<br>Length: 31 pp.<br>Number: W05/23<br>Abstract: This paper investigates co-operative research activity by firms using data from
the 3rd Community Innovation Survey for four countries, France, Germany, Spain and the
UK. We build on the Cassiman and Veugelers (CV) (2002) study of Belgian manufacturing
firms, by incorporating information on the service sector, and considering the role of public
support in affecting firms' decisions to co-operate. Our results support those in CV, in that
we find a positive relationship between the likelihood of undertaking co-operative R&amp;D
and both incoming knowledge spillovers and the extent to which firms find strategic
methods important in appropriating the returns to innovative activity. We find that public
support is positively related to the probability of undertaking co-operative agreements
particularly with regard to the likelihood of co-operation with the research base. We find
some evidence, in particular for Spain, that firms carry out co-operative R&amp;D to overcome
excessive perceived risks and financial constraints.<br>Classification-JEL: O31, O32, L24<br>Keywords: R&amp;D co-operation, spillovers, joint ventures, CIS<br>File-URL:http://www.ifs.org.uk/wps/wp0523.pdf<br>File-Format: application/pdf<br>File-Size: 343<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/22<br>Title: Outsourcing and offshoring of business services: how important is ICT?<br>Author-Name: Laura Abramovsky<br>Author-X-Name-First: Laura<br>Author-X-Name-Last: Abramovsky<br>Author-Email: l.abramovsky@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Creation-Date: 200510<br>Length: 16 pp.<br>Number: W05/22<br>Abstract: This paper considers the impact that technology has on firms' choices over organisational form, in particular whether to produce inhouse or outsource and offshore services, and firms' decision over the location of activity. Technology reduces the transaction and adjustment costs of moving activity outside the firm and of carrying out at greater geographic distance. We find that more technology intensive firms purchase a greater amount of services on the market and purchase more offshore than less technologically intensive firms.<br>Classification-JEL: D21, F23, L23<br>Keywords: Outsourcing, offshoring, ICT, business services<br>File-URL:http://www.ifs.org.uk/wps/wp0522.pdf<br>File-Format: application/pdf<br>File-Size: 330<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/21<br>Title: Job changes, hours changes and the path of labour supply adjustment<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Mike Brewer<br>Author-X-Name-First: Mike<br>Author-X-Name-Last: Brewer<br>Author-Email: m.brewer@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and ISER, Essex University<br>Author-Name: Marco Francesconi<br>Author-X-Name-First: Marco<br>Author-X-Name-Last: Francesconi<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and ISER, Essex University<br>Creation-Date: 200510<br>Length: 35 pp.<br>Number: W05/21<br>Abstract: This paper uses the first twelve waves of the British Household Panel Survey covering the period
1991-2002 to investigate single women's labour supply changes in response to three tax and benefit policy reforms that occurred in the 1990s. We find evidence of small labour supply effects for two
of such reforms. A third reform in 1999 instead led to a significant increase in single mothers' hours
of work. This increase was primarily driven by women who changed job, suggesting that labour
supply adjustments within a job are harder than across jobs. The presence of hours inflexibility
within jobs and labour supply adjustments through job mobility are strongly confirmed when we
look at hours changes by stated labour supply preferences. Finally, we find little overall effect on wages.<br>Classification-JEL: C23, H31, I38, J12, J13, J22<br>Keywords: Job mobility; Hours flexibility; Labour supply preferences; Hours-wage trade-off; Monopsony<br>File-URL:http://www.ifs.org.uk/wps/wp0521.pdf<br>File-Format: application/pdf<br>File-Size: 381<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/20<br>Title: Best nonparametric bounds on demand responses<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Martin Browning<br>Author-X-Name-First: Martin<br>Author-X-Name-Last: Browning<br>Author-Email: martin.browning@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Nuffield College, Oxford<br>Author-Name: Ian Crawford<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Crawford<br>Author-Email: Ian.Crawford@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Oxford<br>Creation-Date: 200510<br>Length: 25 pp.<br>Number: W05/20<br>Abstract: This paper uses revealed preference inequalities to provide tight nonparametric bounds on consumer responses to price changes. Price responses are allowed to vary nonparametrically across the income distribution by exploiting microdata on consumer expenditures and incomes over a finite set of discrete relative price changes. This is achieved by combining the theory of revealed preference with the semiparametric estimation of consumer expansion paths (Engel curves). We label these expansion path based bounds as E-bounds. Deviations from revealed preference restrictions aremeasured by preference perturbations which are shown to usefully characterise taste change.<br>Classification-JEL: D12, C14, C43<br>Keywords: Demand responses, relative prices, revealed preference, semiparametric regression, changing tastes<br>File-URL:http://cemmap.ifs.org.uk/wps/cwp1205.pdf<br>File-Format: application/pdf<br>File-Size: 734<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/19<br>Title: Social experiments and instrumental variables with duration outcomes<br>Author-Name: Jaap Abbring<br>Author-X-Name-First: Jaap<br>Author-X-Name-Last: Abbring<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Tinbergen Institute<br>Author-Name: Gerard van den Berg<br>Author-X-Name-First: Gerard<br>Author-X-Name-Last: van den Berg<br>Author-Email: gjvdberg@xs4all.nl<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Mannheim<br>Creation-Date: 200510<br>Length: 41 pp.<br>Number: W05/19<br>Abstract: This paper examines the empirical analysis of treatment effects on duration outcomes from data that contain instrumental variation. We focus on social experiments in which an intention to treat is randomized and compliance may be imperfect. We distinguish between cases where the treatment starts at the moment of randomization and cases where it starts at a later point in time. We derive exclusion restrictions under various informational and behavioral assumptions and we analyze identifiability under these restrictions. It turns out that randomization (and by implication, instrumental variation) by itself is often insufficient for inference on interesting effects, and needs to be augmented by a semi-parametric structure. We develop corresponding non- and semi-parametric tests and estimation methods.<br>Classification-JEL: C14, C31, C41, J6<br>Keywords: Event-history analysis, intention to treat, non-compliance, policy evaluation, selection<br>File-URL:http://www.ifs.org.uk/wps/wp0519.pdf<br>File-Format: application/pdf<br>File-Size: 358<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/18<br>Title: Choosing among alternative classification criteria to measure the labour force state<br>Author-Name: Erich Battistin<br>Author-X-Name-First: Erich<br>Author-X-Name-Last: Battistin<br>Author-Email: e.battistin@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name:  Enrico Rettore<br>Author-X-Name-First: Enrico<br>Author-X-Name-Last:  Rettore<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Ugo Trivellato<br>Author-X-Name-First: Ugo<br>Author-X-Name-Last:  Trivellato<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200510<br>Length: 48 pp.<br>Number: W05/18<br>Abstract: Current labour force counting relies on general guidelines set by the International Labour Office(ILO) to classify individuals into three labour force states: employment, unemployment and in activity. However, the resulting statistics areknown to be sensitive to slight variations of operational definitions prima facie consistent with the general guidelines. In this paper two alternative classification criteria are considered: a 'strict' criterion followed by Eurostat, which results from a stringent interpretation of the ILO guidelines, and a 'mild' criterion followed by the Italian Statistical Office up to 1992. We first show that the labour force statistics resulting from the two classification criteria differ considerably. We then discuss the relative merits of the two criteria by comparing those individuals whose classification depends on the criterion adopted to individuals whose classification is common across criteria. Similarities are established with respect to characteristics known to be relevant to the labour force state to assess which benchmark group individuals whose state is questionable look like the most. An application is presented to samples of married women from the Italian Labour Force Survey from five survey occasions between 1984 and 2000. Results are neatly in favour of the 'mild' criterion and are rather robust to changes in the business cycle, the participation rate, local labour market conditions and the questionnaire design.<br>Classification-JEL: J64, J22<br>Keywords: ILO classification, Mixture Models, Unemployment<br>File-URL:http://www.ifs.org.uk/wps/wp0518.pdf<br>File-Format: application/pdf<br>File-Size: 345<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/17<br>Title: Dissecting dividend decisions: some clues about the effects of dividend taxation from recent UK reforms<br>Author-Name: Steve Bond<br>Author-X-Name-First: Steve<br>Author-X-Name-Last: Bond<br>Author-Email: steve.bond@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Nuffield College, Oxford<br>Author-Name: Michael Devereux<br>Author-X-Name-First: Michael<br>Author-X-Name-Last: Devereux<br>Author-Email: michael.devereux@sbs.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Oxford<br>Author-Name: Alexander Klemm<br>Author-X-Name-First: Alexander<br>Author-X-Name-Last: Klemm<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200508<br>Length: 50 pp.<br>Number: W05/17<br>Abstract: We present empirical evidence which suggests that a big increase in dividend taxation for UK pension funds in July 1997 affected the form in which some UK companies chose to make dividend payments, but otherwise had limited effects
on both the level of dividend payments and the level of investment. These findings are consistent with a version of the 'new view' of dividend taxation.
We also identify a group of firms whose dividend choices are difficult to reconcile
with (stock market) value maximisation.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0517.pdf<br>File-Format: application/pdf<br>File-Size: 599<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/16<br>Title: The impact of training on productivity and wages: evidence from British panel data<br>Author-Name: Lorraine Dearden<br>Author-X-Name-First: Lorraine<br>Author-X-Name-Last: Dearden<br>Author-Email: l.dearden@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London<br>Author-Name: Howard Reed<br>Author-X-Name-First: Howard<br>Author-X-Name-Last: Reed<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name:  John Van Reenen<br>Author-X-Name-First: John<br>Author-X-Name-Last:  Reenen<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200508<br>Length: 39 pp.<br>Number: W05/16<br>Abstract: It is standard in the literature on training to use wages as a sufficient statistic for productivity. This paper examines the effects of work-related training on direct measures of productivity. Using a new panel of British industries 1983-1996 and a
variety of estimation techniques we find that work-related training is associated with
significantly higher productivity. A one percentage point increase in training is
associated with an increase in value added per hour of about 0.6% and an increase
in hourly wages of about 0.3%. We also show evidence using individual level
datasets that is suggestive of training externalities.<br>Classification-JEL: J31, C23, D24<br>Keywords: Productivity, training, wages, panel data<br>File-URL:http://www.ifs.org.uk/wps/wp0516.pdf<br>File-Format: application/pdf<br>File-Size: 561<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/15<br>Title: Do the "Joneses" really matter? Peer-group versus correlated effects in intertemporal consumption choice<br>Author-Name: J&uuml;rgen Maurer<br>Author-X-Name-First: J&uuml;rgen<br>Author-X-Name-Last: Maurer<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name:  Andr&eacute; Meier<br>Author-X-Name-First: Andr&eacute;<br>Author-X-Name-Last:  Meier<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200507<br>Length: 36 pp.<br>Number: W05/15<br>Abstract: Recent theoretical contributions have suggested consumption externalities, or peergroup effects, as a potential explanation for some of the puzzles in macroeconomics and finance. However, the empirical relevance of peer effects for intertemporal consumption
choice is a completely open question. To shed some light on the issue, we derive an extension
of the standard life-cycle model that allows for consumption externalities. The analysis
is complicated by the challenge of disentangling actual peer effects from merely correlated
effects operating through common features or shocks within peer groups. We show how
to conduct reliable inference under these circumstances based on within-group equilibrium
conditions that give rise to a social multiplier. This approach can be understood as an
adaptation of Manski's "reflection problem framework" to the case of dynamic models with
endogenous regressors. We estimate our model using US panel data from the PSID. While
there is strong predictable consumption co-movement within peer groups, the evidence for
true consumption externalities vanishes once correlated effects are adequately accounted
for.<br>Classification-JEL: C23, D12, D91, Z13<br>Keywords: Consumption, Life-Cycle Model, Peer Effects, Reflection Problem<br>File-URL:http://www.ifs.org.uk/wps/wp0515.pdf<br>File-Format: application/pdf<br>File-Size: 556<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/14<br>Title: Measuring the marginal efficiency cost of redistribution in the UK<br>Author-Name: Stuart Adam<br>Author-X-Name-First: Stuart<br>Author-X-Name-Last: Adam<br>Author-Email: s.adam@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200507<br>Length: 85 pp.<br>Number: W05/14<br>Abstract: This paper estimates the marginal efficiency cost of redistribution (MECR) associated with a demogrant and an in-work benefit for the UK since 1979, taking account of extensive as well as intensive labour supply responses. The principal methodological advance in the paper is its greater allowance for
heterogeneity in the population than previous work. The rate of tax on
consumption expenditure is allowed to vary across households and overall tax
rates are allowed to vary across all individuals in all years, using a
microsimulation methodology for the calculations. This disaggregation makes a
substantial difference to the results.</p>

<p>The central finding of the paper is that the MECR is much lower for the in-work
benefit policy than the demogrant. The efficiency loss associated with a marginal
in-work benefit has consistently been low (and occasionally negative): even at its
current 25-year high, the policy would cost losers only �1.30 per pound that the
gainers gained. By contrast, losers from a demogrant would currently lose �4.30
per pound that gainers received, higher than at other times over the last 15 years
but still well short of the peak of �8.02 seen in 1981. Although precise estimates
are highly sensitive to the overall levels of tax rates and elasticities, and also to
the composition of the overall labour supply elasticity, the principal finding of a
stark contrast between the two policies is robust.</p>
<p>The paper also examines the effect of redistribution within family types. The inwork
benefit policy looks even more favourable if paid to (and financed by) only
singles; it looks less favourable if implemented only for childless couples.
Increasing in-work benefits and/or cutting tax rates for lone parents have
provided opportunities for Pareto-improving reforms to the tax and benefit
system for most of the period since 1979.<br>Classification-JEL: H21, H23, D61, D63, H31<br>Keywords: Redistribution, efficiency, optimal taxation, labour supply, extensive margin, tax rates<br>File-URL:http://www.ifs.org.uk/wps/wp0514.pdf<br>File-Format: application/pdf<br>File-Size: 952<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/13<br>Title: Preparing for retirement: the pension arrangements and retirement expectations of those approaching state pension age in England<br>Author-Name: James Banks<br>Author-X-Name-First: James<br>Author-X-Name-Last: Banks<br>Author-Email: j.banks@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Zo&euml; Oldfield<br>Author-X-Name-First: Zo&euml;<br>Author-X-Name-Last: Oldfield<br>Author-Email: z.oldfield@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200507<br>Length: 37 pp.<br>Number: W05/13<br>Abstract: This paper provides a detailed analysis of individuals in households in England aged between 50 and the State Pension Age in terms of their private pension arrangements and current non-pension assets alongside their expectations of future economic circumstances. Our descriptive findings include that
members of defined benefit pensions have higher average levels
of current earnings than members of defined contribution
pensions and that median expected private pension income in
retirement is highest for current members of defined benefit
schemes. We find that on average those who have, or have had,
a private pension have greater non-pension wealth than those
who have never had a private pension. In terms of expectations
of the future we find that it is those who have the fewest assets
who have the least attachment to the labour market and are far
less likely to expect any inheritance. Hence we conclude that inequalities in different dimensions of retirement resources tend
to reinforce themselves as opposed to offset each other.</p><p>This working paper was updated in October 2005 to take account of revised housing wealth numbers.</p>

<p>Appendices containing additional tables can be downloaded here: <a href="/wps/wp0513_a2.pdf">Section 2</a> <img src="/images/pdf.gif" height=16 width=35 alt="pdf file" border=0> [138 KB]; <a href="/wps/wp0513_a3.pdf">Sections 3</a> <img src="/images/pdf.gif" height=16 width=35 alt="pdf file" border=0> [119 KB]; <a href="/wps/wp0513_a4.pdf">Section 4</a> <img src="/images/pdf.gif" height=16 width=35 alt="pdf file" border=0> [179 KB];<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0513.pdf<br>File-Format: application/pdf<br>File-Size: 339<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/12<br>Title: Job changes, hours changes and labour market flexibility: panel data evidence for Britain<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Mike Brewer<br>Author-X-Name-First: Mike<br>Author-X-Name-Last: Brewer<br>Author-Email: m.brewer@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and ISER, Essex University<br>Author-Name: Marco Francesconi<br>Author-X-Name-First: Marco<br>Author-X-Name-Last: Francesconi<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and ISER, Essex University<br>Creation-Date: 200507<br>Length: 63 pp.<br>Number: W05/12<br>Abstract: This study uses the first twelve waves of the British Household Panel Survey covering the
period 1991-2002 to investigate the extent of constraints on desired hours of work within jobs
and the degree of flexibility of the labour market for a sample of women. Our main findings
are as follows. First, the largest movements in hours worked are observed for workers who
change their jobs. Second, about 40 percent of the women in the sample are not putting in the
hours they would like. Most of them (mainly full-timers) would like to work fewer hours at
the prevailing hourly wage. Again, women who change job experience the greatest hours
changes, especially if they are over- or under-employed. Third, there is evidence of hours
constraints. The hours movements among quitters are up to 5 hours greater than the
movements among stayers. Fourth, we do not detect systematic time trends in the relationship
between hours changes and job changes. But there is some evidence that overemployed
women find it increasingly more difficult to move towards their desired hours even after
changing job. Fifth, the evidence on a flexible labour market is mixed. We find only partial
support for the hypothesis that overemployed or underemployed quitters receive
compensating wage differentials if the new job does not satisfy their hours preferences, as
well as for the hypothesis that quitters get a wage premium when they end up moving to jobs
that constraint their desired hours.<br>Classification-JEL: C23, H31, I38, J12, J13, J22<br>Keywords: Job mobility; Hours constraints; Labour supply preferences; Hours-wage trade-off;  Part-time employment.<br>File-URL:http://www.ifs.org.uk/wps/wp0512.pdf<br>File-Format: application/pdf<br>File-Size: 337<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/11<br>Title: Education subsidies and school drop-out rates<br>Author-Name: Lorraine Dearden<br>Author-X-Name-First: Lorraine<br>Author-X-Name-Last: Dearden<br>Author-Email: l.dearden@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Christine Frayne<br>Author-X-Name-First: Christine<br>Author-X-Name-Last: Frayne<br>Author-Email: Christine.FRAYNE@ec.europa.eu<br>Author-Workplace-Name: Institute for Fiscal Studies and European Commission (formerly IFS staff)<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Creation-Date: 200506<br>Length: 41 pp.<br>Number: W05/11<br>Abstract: This paper evaluates whether means-tested grants paid to secondary students are an effective way of reducing the proportion of school dropouts. We look at this
problem using matching techniques on a pilot study
carried out in England during 1999 and 2000 using a
specially designed dataset that ensures that valid
comparisons between our pilot and control areas are
made. The impact of the subsidy is quite substantial
with initial participation rates (at age 16/17) being
around 4.5 percentage points higher. Full-time
participation rates one year later are found to have
increased by around 6.4 percentage points which is
largely due to the EMA having a significant effect on
retention in post compulsory education. These effects
vary by eligibility group with those receiving the full
payment having the largest initial increase in
participation, whilst the effects for those who are
partially eligible are only significantly different from the
control group in the second year of the program. There
is some evidence that the participation rate effect is
stronger for boys, especially in the second year, and that
the policy goes some way to reducing the gap in dropout
rates between boys and girls. It is also clear that the
policy has the largest impact on children from the
poorest socio-economic background.<br>Classification-JEL: H52, I28, J24<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0511.pdf<br>File-Format: application/pdf<br>File-Size: 231<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/10<br>Title: Parental income and children's smoking behaviour: evidence from the British Household Panel Survey<br>Author-Name: Laura Blow<br>Author-X-Name-First: Laura<br>Author-X-Name-Last: Blow<br>Author-Email: l.blow@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Andrew Leicester<br>Author-X-Name-First: Andrew<br>Author-X-Name-Last: Leicester<br>Author-Email: a.leicester@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Frank Windmeijer<br>Author-X-Name-First: Frank<br>Author-X-Name-Last: Windmeijer<br>Author-Email: F.Windmeijer@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Bristol<br>Creation-Date: 200505<br>Length: 15 pp.<br>Number: W05/10<br>Abstract: Does money matter? When investigating health behaviour, research often finds a strong
positive association between income and healthy behaviour. This could however be due to
individual characteristics that determine both income and health investment and is not
necessarily due to the role of money per se. In this study we look at this relationship over the generations by studying the association between parental income and children's prevalence to smoke in Britain using data from the British Household Panel Survey and British Youth Survey. We find an inverse relation between parental income and children's
smoking prevalence, but when looking at within household changes by comparing
sibling's smoking status differences at the same age, we find instead a positive effect.
This indicates that within household increases in income lead to an increased probability
of smoking of a younger child.<br>Classification-JEL: I12, C23<br>Keywords: Child smoking, Parental income, Panel Data<br>File-URL:http://www.ifs.org.uk/wps/wp0510.pdf<br>File-Format: application/pdf<br>File-Size: 111<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/09<br>Title: Estimating pension wealth of ELSA respondents<br>Author-Name: James Banks<br>Author-X-Name-First: James<br>Author-X-Name-Last: Banks<br>Author-Email: j.banks@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Gemma Tetlow<br>Author-X-Name-First: Gemma<br>Author-X-Name-Last: Tetlow<br>Author-Email: g.tetlow@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200505<br>Length: 68 pp.<br>Number: W05/09<br>Abstract: This paper explains the methodology used for calculating pension wealth for all individuals in the first wave of the English Longitudinal Study of Ageing (ELSA). We focus on the pension wealth of individuals aged between 50 and the state pension age. Both state and private pension wealth has been calculated and each has been calculated both on the basis of immediate retirement in 2002 and on the basis of retirement at the state pension age. Sensitivity analysis of our assumptions is also presented, which shows that the distribution of pension wealth is sensitive to our assumptions about the discount rate and contracting out histories but insensitive to assumptions about future earnings growth, future annuity rates and future asset returns.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0509.pdf<br>File-Format: application/pdf<br>File-Size: 585<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/08<br>Title: Long-term effects of a mandatory multistage program: the New Deal for young people in the UK<br>Author-Name:  Giacomo De Giorgi<br>Author-X-Name-First: Giacomo<br>Author-X-Name-Last:  Giorgi<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200504<br>Length: 29 pp.<br>Number: W05/08<br>Abstract: The New Deal For Young People is the major welfare-to-work program in the UK. It is a
mandatory multistage policy targeted at the 18-24 year old unemployed. This paper investigates the effectiveness of the program in terms of enhancing the (re)employment probability
of participant males. I exploit the eligibility rule to identify a suitable counterfactual relying
upon a simple regression discontinuity design. By exploiting such a discontinuity I am able
to non parametrically identify (Hahn et al., 2001) a local average treatment effect (LATE).
While relying upon the non parametric local linear regression method I am able to push
forward such a parameter to a "global" dimension, implicitly adding parametric structure.
No evidence of possible general equilibrium as well as substitution effects is found by a co-
hort specific approach (before and after the program). The main result is that the program
enhances employability by about 6-7%.<br>Classification-JEL: J18, J23, J38, C14<br>Keywords: Labour market policy evaluation, regression discontinuity, non parametric<br>File-URL:http://www.ifs.org.uk/wps/wp0508.pdf<br>File-Format: application/pdf<br>File-Size: 1174<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/07<br>Title: Retail productivity<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Heike Harmgart<br>Author-X-Name-First: Heike<br>Author-X-Name-Last: Harmgart<br>Author-Email: HarmgarH@ebrd.com<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200503<br>Length: 10 pp.<br>Number: W05/07<br>Abstract: Recent attention has focused on the UK's productivity gap in the retail sector. Figure 1 shows an estimate of labour productivity in retail across countries, using output per hour worked. The UK lies well behind the US, France and Germany.</p> 

<p>Reynolds at al (2005) contribute to this debate by providing a discussion of the literature, along side interviews with several UK and US retail firms. The conclusions of their paper are that, while there are many measurement issues, most of the evidence points to the fact that, on average, productivity in this sector in the UK is low and has grown slowly over recent years when compared to the US. They rightly point out that a more thorough understanding of what drives productivity in the retail sector requires a better understanding of the 'complex mix of urban characteristics, consumer preferences and competitive rivalries'.<p>

<p>In this article we discuss some of the main issues involved in the measurement of productivity in retail, how these problems can be tackled, and we consider the interpretation of these statistics. We then discuss new work using microdata on the UK supermarket industry and conclude with a short discussion of where future research needs to look to answer the important policy questions around why the UK's productivity performance remains low in this important sector.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0507.pdf<br>File-Format: application/pdf<br>File-Size: 80<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/06<br>Title: Household Nash equilibrium with voluntarily contributed public goods<br>Author-Name: Val&eacute;rie Lechene<br>Author-X-Name-First: Val&eacute;rie<br>Author-X-Name-Last: Lechene<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Ian Preston<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Preston<br>Author-Email: i.preston@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200503<br>Length: 33 pp.<br>Number: W05/06<br>Abstract: We study noncooperative models with two agents and several voluntarily contributed public goods. We focus on interior equilibria in which neither agent is bound by non negativity constraints, establishing the conditions for existence and uniqueness of the equilibrium. While adding-up and homogeneity hold, negativity and symmetry properties are generally violated. We derive the counterpart to the Slutsky matrix, and show that it can be decomposed into the sum of a symmetric and negative semidefinite matrix and another the rank of which never exceeds the number of public goods plus one. Under separability of the public goods the deviation from symmetry is at most rank two.<br>Classification-JEL: D11, C72<br>Keywords: Nash equilibrium, Intra-household allocation, Slutsky<br>File-URL:http://www.ifs.org.uk/wps/wp0506.pdf<br>File-Format: application/pdf<br>File-Size: 246<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/05<br>Title: The impact of parental income and education on the schooling of their children<br>Author-Name:  Arnaud Chevalier<br>Author-X-Name-First: Arnaud<br>Author-X-Name-Last:  Chevalier<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Colm Harmon<br>Author-X-Name-First: Colm<br>Author-X-Name-Last:  Harmon<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Vincent O'Sullivan<br>Author-X-Name-First: Vincent<br>Author-X-Name-Last:  O'Sullivan<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Ian Walker<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Walker<br>Author-Email: ian.walker@lancaster.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Lancaster University<br>Creation-Date: 200502<br>Length: <br>Number: W05/05<br>Abstract: This paper addresses the intergeneration transmission of education and investigates the extent to which early school leaving (at age 16) may be due to variations in permanent income, parental education levels, and shocks to income at this age. Least squares
estimation reveals conventional results - stronger effects of maternal education than
paternal, and stronger effects on sons than daughters. We find that the education effects
remain significant even when household income is included. Moreover, decomposing the
income when the child is 16 between a permanent component and shocks to income at age
16 only the latter is significant. It would appear that education is an important input even
when we control for permanent income but that credit constraints at age 16 are also
influential. However, when we use instrumental variable methods to simultaneously account
for the endogeneity of parental education and paternal income, we find that the strong
effects of parental education become insignificant and permanent income matters much
more, while the effects of shocks to household income at 16 remain important. A similar
pattern of results are reflected in the main measure of scholastic achievement at age 16.
These findings have important implications for the design of policies aimed at encouraging
pupils to remain in school longer.<br>Classification-JEL: I20, J62<br>Keywords: Early school leaving, intergenerational transmission<br>File-URL:http://www.ifs.org.uk/wps/wp0505.pdf<br>File-Format: application/pdf<br>File-Size: 180<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/04<br>Title: Adjustment costs and the identification of Cobb Douglas production functions<br>Author-Name: Steve Bond<br>Author-X-Name-First: Steve<br>Author-X-Name-Last: Bond<br>Author-Email: steve.bond@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Nuffield College, Oxford<br>Author-Name:  M&aring;ns S&ouml;derbom<br>Author-X-Name-First: M&aring;ns<br>Author-X-Name-Last:  S&ouml;derbom<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200502<br>Length: 30 pp.<br>Number: W05/04<br>Abstract: Cobb Douglas production function parameters are not identified from cross-section variation when inputs are perfectly flexible and chosen optimally, and input prices are common to all firms. We consider the role of adjustment
costs for inputs in identifying these parameters in this context. The presence of adjustment costs for all inputs allows production function parameters to be identified, even in the absence of variation in input prices. This
source of identification appears to be quite fragile when adjustment costs are deterministic, but more useful in the case of stochastic adjustment costs.
We illustrate these issues using simulated production data.<br>Classification-JEL: D20, D24, C23<br>Keywords: Production functions, adjustment costs, identification<br>File-URL:http://www.ifs.org.uk/wps/wp0504.pdf<br>File-Format: application/pdf<br>File-Size: 248<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/03<br>Title: Exploring the returns to scale in food preparation (baking penny buns at home)<br>Author-Name: Thomas Crossley<br>Author-X-Name-First: Thomas<br>Author-X-Name-Last: Crossley<br>Author-Email:  tfc22@cam.ac.uk <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Cambridge<br>Author-Name:  Yuqian Lu<br>Author-X-Name-First: Yuqian<br>Author-X-Name-Last:  Lu<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200501<br>Length: 28 pp.<br>Number: W05/03<br>Abstract: &lt;p&gt;&lt;p&gt;We show that as household size increases, households substitute away from prepared foods and towards ingredients. They also devote more time to food preparation. These observations (1) are consistent with a simple model with home production, returns to scale in the time input to food preparation, and varieties of food that differ in the required time input; (2) support the idea that returns to scale in home production are an important source of returns to scale in consumption; and (3), mean that across household sizes, household market expenditures on food are not proportional to food consumption quantities. The latter may provide a partial explanation for a puzzle raised by Deaton and Paxson.&lt;/p&gt;&lt;/p&gt;<br>Classification-JEL: D11, D12, D13<br>Keywords: Household returns to scale, home production, food preparation<br>File-URL:http://www.ifs.org.uk/wps/wp0503.pdf<br>File-Format: application/pdf<br>File-Size: 367<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/02<br>Title: Borrowing constraints, the cost of precautionary saving and unemployment insurance<br>Author-Name: Thomas Crossley<br>Author-X-Name-First: Thomas<br>Author-X-Name-Last: Crossley<br>Author-Email:  tfc22@cam.ac.uk <br>Author-Workplace-Name: Institute for Fiscal Studies and University of Cambridge<br>Author-Name: Hamish Low<br>Author-X-Name-First: Hamish<br>Author-X-Name-Last: Low<br>Author-Email: Hamish.Low@econ.cam.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Trinity College, Cambridge<br>Creation-Date: 200501<br>Length: 62 pp.<br>Number: W05/02<br>Abstract: &lt;p&gt;Job losers exhibit significant heterogeneity in wealth holdings and in the marginal propensity to consume transitory income. We consider potential sources of this heterogeneity, whether (some of) the unemployed face borrowing constraints, and the implications of this heterogeneity for unemployment insurance. We show theoretically how the&lt;/p&gt;&lt;p&gt;optimal benefit can depend significantly on borrowing constraints, and on other (non-&lt;/p&gt;&lt;p&gt;precautionary) savings motives. We report empirical evidence that (i) a quarter of job&lt;/p&gt;&lt;p&gt;losers cannot borrow for current consumption, (ii) this constraint is binding for a much&lt;/p&gt;&lt;p&gt;smaller fraction, and (iii) that \'excess sensitivity\' is not limited to the constrained.&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0502.pdf<br>File-Format: application/pdf<br>File-Size: 829<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:05/01<br>Title: Entry costs and stock market participation over the life cycle<br>Author-Name:  Sule Alan<br>Author-X-Name-First: Sule<br>Author-X-Name-Last:  Alan<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200501<br>Length: 37 pp.<br>Number: W05/01<br>Abstract: Several explanations for the observed limited stock market participation have been offered in the literature. One of the most promising one is the presence of market frictions mostly in the
form of fixed entry and/or transaction costs. Empirical studies strongly point to a significant
structural (state) dependence in the the stock market entry decision, which is consistent with
costs of these types. However, the magnitude of these costs are not yet known.</p>
<p>This paper focuses on fixed stock market entry costs. I set up a structural estimation
procedure which involves solving and simulating a life cycle intertemporal portfolio choice model
augmented with a fixed stock market entry cost. Important features of household portfolio data
(from the PSID) are matched to their simulated counterparts. Utilizing a Simulated Minimum
Distance estimator, I estimate the coefficient of relative risk aversion, the discount factor and
the stock market entry cost. Given the equity premium and the calibrated income process, I
estimate a one-time entry cost of approximately 2 percent of (annual) permanent income. My
estimated model matches the zero median holding as well as the hump-shaped age-participation
profile observed in the data.<br>Classification-JEL: G11, D91<br>Keywords: Entry costs; Stock market; Structural estimation<br>File-URL:http://www.ifs.org.uk/wps/wp0501.pdf<br>File-Format: application/pdf<br>File-Size: 392<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/35<br>Title: Waiting lists, waiting times and admissions: an empirical analysis at hospital and general practice level<br>Author-Name: Frank Windmeijer<br>Author-X-Name-First: Frank<br>Author-X-Name-Last: Windmeijer<br>Author-Email: F.Windmeijer@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Bristol<br>Author-Name:  Hugh Gravell<br>Author-X-Name-First: Hugh<br>Author-X-Name-Last:  Gravell<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Pierre Hoonhout<br>Author-X-Name-First: Pierre<br>Author-X-Name-Last:  Hoonhout<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200412<br>Length: 29 pp.<br>Number: W04/35<br>Abstract: We report an empirical analysis of the responses of the supply and demand for secondary care to waiting list size and waiting times. Whereas previous empirical
analyses have used data aggregated to area level, our analysis is novel in that it
focuses on the supply responses of a single hospital and the demand responses of the
GP practices it serves, and distinguishes between outpatient visits, inpatient
admissions, daycase treatment and emergency admissions. The results are plausible
and in line with the theoretical model. For example: the demand from practices for
outpatient visits is negatively affected by waiting times and distance to the hospital.
Increases in waiting times and waiting lists lead to increases in supply; the supply of
elective inpatient admissions is affected negatively by current emergency admissions
and positively by lagged waiting list and waiting time. We use the empirical results to
investigate the dynamic responses to one off policy measures to reduce waiting times
and lists by increasing supply.<br>Classification-JEL: I11, H42<br>Keywords: waiting time; waiting list; hospital admissions<br>File-URL:http://www.ifs.org.uk/wps/wp0435.pdf<br>File-Format: application/pdf<br>File-Size: 188<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/34<br>Title: Vertical integration and technology: theory and evidence<br>Author-Name:  Daron Acemoglu<br>Author-X-Name-First: Daron<br>Author-X-Name-Last:  Acemoglu<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Philippe Aghion<br>Author-X-Name-First: Philippe<br>Author-X-Name-Last: Aghion<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Harvard University<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Fabrizio Zilibotti<br>Author-X-Name-First: Fabrizio<br>Author-X-Name-Last: Zilibotti<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200412<br>Length: 49 pp.<br>Number: W04/34<br>Abstract: This paper investigates the determinants of vertical integration using data from the UK manufacturing sector. We find that the relationship between a downstream (producer) industry and an upstream (supplier) industry us more likely to be vertically integrated when the producing industry is more technology intensive and the supplying industry is less technology intensive. Moreover, both of these effects are stronger when the supplying industry accounts for a large fraction of the producer\\\'s costs. These results are generally robust and hold with alternative measures of technology intensity, with alternative estimation straegies, and with or without contraolling for a number of firm and industry-level characteristics. They are consistent with the incomplete contract theories of the firm that emphasize both the potential costs and benefits of vertical integration in terms of investment incentives.<br>Classification-JEL: L22, L23, L24, L60<br>Keywords: holdup, incomplete contracts, internal organisation fo the firm, investment, R&amp;D, technology, vertical integration<br>File-URL:http://www.ifs.org.uk/wps/wp0434.pdf<br>File-Format: application/pdf<br>File-Size: 438<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/33<br>Title: Effectiveness of tax incentives to boost (retirement) saving: theoretical motivation and empirical evidence<br>Author-Name: Orazio Attanasio<br>Author-X-Name-First: Orazio<br>Author-X-Name-Last: Attanasio<br>Author-Email: o.attanasio@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: James Banks<br>Author-X-Name-First: James<br>Author-X-Name-Last: Banks<br>Author-Email: j.banks@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Matthew Wakefield<br>Author-X-Name-First: Matthew<br>Author-X-Name-Last: Wakefield<br>Author-Email: m.wakefield@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Bologna<br>Creation-Date: 200412<br>Length: 37 pp.<br>Number: W04/33<br>Abstract: The adequacy of household saving for retirement has become a policy issue all around the world. The UK and US have been in the vanguard of those countries that have tried to encourage retirement saving by providing tax-favoured treatment for particular savings accounts. We consider empirical evidence from these two countries regarding the extent to which funds in some specific tax advantaged accounts (IRAs in the US,
TESSAs and ISAs in the UK) represent new savings. Our best interpretation of this evidence is that: only relatively small fractions of these funds can be considered to be &quot;new&quot; saving and so these policies have been an expensive means of encouraging saving; there has been some deadweight loss from the policies associated with
&quot;reshuffling&quot; of existing savings. Continuing improvements in data on individual financial behaviour create scope for future empirical analysis of incentives to save, both within the standard economic framework that we explain and exploit, and by considering extensions to and adaptations of it.<br>Classification-JEL: D910, H390<br>Keywords: Saving, tax incentives to save, lifecycle model, household behaviour<br>File-URL:http://www.ifs.org.uk/wps/wp0433.pdf<br>File-Format: application/pdf<br>File-Size: 305<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/32<br>Title: How special is the special relationship? Using the impact of US R&D spillovers on UK firms as a test of technology sourcing<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name:  Rupert Harrison<br>Author-X-Name-First: Rupert<br>Author-X-Name-Last:  Harrison<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  John Van Reenen<br>Author-X-Name-First: John<br>Author-X-Name-Last:  Reenen<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200412<br>Length: 53 pp.<br>Number: W04/32<br>Abstract: How much does US-based R&D benefit other countries and through what mechanisms? We test the 'technology sourcing' hypothesis that foreign research labs located on US soil tap into US R&D spillovers and improve home country productivity. Using panels of UK and US firms matched to
patent data we show that UK firms who had established a high proportion of US-based inventors by 1990 benefited disproportionately from the growth of the US R&D stock over the next 10 years. We estimate that UK firmsҍ
Total Factor Productivity would have been at least 5% lower in 2000 (about $14bn) in the absence of the US R&D growth in the 1990s. We also find that technology sourcing is more important for countries and industries who have 'most to learn'. Within the UK, the benefits of technology sourcing were larger in industries whose TFP gap with the US was greater. Between countries, the growth of the UK R&D stock did not appear to have a major benefit for US firms who located R&D labs in the UK. The 'special relationship' between the UK and the US appears distinctly asymmetric.<br>Classification-JEL: O32, O33, F23<br>Keywords: international spillovers; technology sourcing; productivity;<br>File-URL:http://www.ifs.org.uk/wps/wp0432.pdf<br>File-Format: application/pdf<br>File-Size: 1093<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/31<br>Title: Growth, distance to frontier and composition of human capital<br>Author-Name:  J&eacute;r&ocirc;me Vandenbussche<br>Author-X-Name-First: J&eacute;r&ocirc;me<br>Author-X-Name-Last:  Vandenbussche<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Philippe Aghion<br>Author-X-Name-First: Philippe<br>Author-X-Name-Last: Aghion<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Harvard University<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Creation-Date: 200408<br>Length: 51 pp.<br>Number: W04/31<br>Abstract: We examine the contribution of human capital to economy-wide technological improvements through the two channels of innovation and imitation.
We develop a theoretical model showing that skilled labor has
a higher growth-enhancing effect closer to the technological frontier under
the reasonable assumption that innovation is a relatively more skillintensive
activity than imitation. Also, we provide evidence in favor of
this prediction using a panel dataset covering 19 OECD countries between
1960 and 2000 and explain why previous empirical research had found no
positive relationship between initial schooling level and subsequent growth
in rich countries. In particular, we show that in OECD economies it is
crucial to isolate the two separate margins of primary/secondary and tertiary
education. Interestingly, the latter type of schooling proves to be a
factor of economic divergence.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0431.pdf<br>File-Format: application/pdf<br>File-Size: 503<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/30<br>Title: The effect of a large expansion of pre-primary school facilities on
preschool attendance and maternal employment<br>Author-Name: Samuel Berlinski<br>Author-X-Name-First: Samuel<br>Author-X-Name-Last: Berlinski<br>Author-Email: samuelb@iadb.org<br>Author-Workplace-Name: Institute for Fiscal Studies and University College, London<br>Author-Name:  Sebastian Galiani<br>Author-X-Name-First: Sebastian<br>Author-X-Name-Last:  Galiani<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200411<br>Length: 29 pp.<br>Number: W04/30<br>Abstract: We provide evidence on the impact of a large construction of pre-primary school
facilities in Argentina. We estimate the causal impact of the program on pre-primary school
attendance and maternal labor supply. Identification relies on a differences-in-differences
strategy where we combine differences across regions in the number of facilities built with
differences in exposure across cohorts induced by the timing of the program. We find a
sizeable impact of the program on pre-primary school participation among children aged
between 3 and 5. In fact, we cannot reject the null hypothesis of a full take-up of newly
constructed places. In addition, we find that the childcare subsidy induced by the program
increases maternal employment and that this effect is in line with the one previously found
for the US.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0430.pdf<br>File-Format: application/pdf<br>File-Size: 191<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/29<br>Title: Updating the UK's code for fiscal stability<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Christine Frayne<br>Author-X-Name-First: Christine<br>Author-X-Name-Last: Frayne<br>Author-Email: Christine.FRAYNE@ec.europa.eu<br>Author-Workplace-Name: Institute for Fiscal Studies and European Commission (formerly IFS staff)<br>Author-Name: Sarah Love<br>Author-X-Name-First: Sarah<br>Author-X-Name-Last: Love<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200411<br>Length: 45 pp.<br>Number: W04/29<br>Abstract: &lt;p&gt;The 1998 Code for Fiscal Stability sets out the framework within&lt;/p&gt;&lt;p&gt;which UK fiscal policy is now set. While having such a code does&lt;/p&gt;&lt;p&gt;not make it easier for a Government to meet its fiscal objectives, it&lt;/p&gt;&lt;p&gt;may improve the economic credibility of the policy process. To date&lt;/p&gt;&lt;p&gt;the Code has generally worked well, and in any case many of the&lt;/p&gt;&lt;p&gt;Treasury's practices exceed the minimum requirements of the Code.&lt;/p&gt;&lt;p&gt;However, improvements could be made in the light of recent&lt;/p&gt;&lt;p&gt;experiences. In particular it would be preferable for less emphasis to&lt;/p&gt;&lt;p&gt;be placed on the precise forecasts for fiscal aggregates and greater&lt;/p&gt;&lt;p&gt;emphasis to be placed on the magnitude of the risks to those&lt;/p&gt;&lt;p&gt;forecasts. Using the projections contained in the March 2004&lt;/p&gt;&lt;p&gt;Budget, and information on the size of errors made in the past, we&lt;/p&gt;&lt;p&gt;estimate that there is now a 60% chance that the Chancellor's&lt;/p&gt;&lt;p&gt;&quot;golden rule&quot; will be met without further tax increases or spending&lt;/p&gt;&lt;p&gt;cuts. This compares to 74% for the forecast made by the Treasury&lt;/p&gt;&lt;p&gt;12 months earlier. As well as clarifying how cautious forecasts are,&lt;/p&gt;&lt;p&gt;the uncertainty surrounding projections for fiscal aggregates also&lt;/p&gt;&lt;p&gt;has implications for the way in which progress towards any fiscal&lt;/p&gt;&lt;p&gt;rules should be interpreted.&lt;/p&gt;<br>Classification-JEL: E62, H62<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0429.pdf<br>File-Format: application/pdf<br>File-Size: 1607<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/28<br>Title: Consumption inequality and partial insurance<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name:  Luigi Pistaferri<br>Author-X-Name-First: Luigi<br>Author-X-Name-Last:  Pistaferri<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Ian Preston<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Preston<br>Author-Email: i.preston@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200411<br>Length: 49 pp.<br>Number: W04/28<br>Abstract: This paper describes the transmission of income inequality into consumption
inequality and in so doing investigates the degree of insurance to income
shocks. It combines panel data on income from the PSID with consumption data
from repeated CEX cross-sections and distinguishes between permanent and
transitory income shocks. We find some partial insurance of permanent income
shocks with more insurance possibilities for the college educated and those
nearing retirement. We find little evidence against full insurance for
transitory income shocks except among low income households. Tax and welfare
benefits are found to play an important role in insuring permanent shocks.
Adding durable expenditures to the consumption measure suggests that durable
replacement is an important insurance mechanism, especially for transitory
income shocks.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0428.pdf<br>File-Format: application/pdf<br>File-Size: 710<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/27<br>Title: Imputing consumption in the PSID using food demand estimates from the CEX<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name:  Luigi Pistaferri<br>Author-X-Name-First: Luigi<br>Author-X-Name-Last:  Pistaferri<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Ian Preston<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Preston<br>Author-Email: i.preston@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200410<br>Length: 27 pp.<br>Number: W04/27<br>Abstract: This paper assesses the accuracy of decomposing income risk into permanent and transitory components using income and consumption data. We develop a specific approximation to the optimal consumption growth rule and use Monte Carlo evidence to show that this approximation can provide a robust method for decomposing income risk. The availability of asset data enables the use of a more accurate approximation allowing for partial sef-insurance against permanent shocks. We show that the use of data on median asset holdings corrects much of the error in the simple approximation which assumes no self-insurance against permanent shocks.<br>Classification-JEL: C30, D41, D91<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0427.pdf<br>File-Format: application/pdf<br>File-Size: 370<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/26<br>Title: Income risk and consumption inequality: a simulation study<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Hamish Low<br>Author-X-Name-First: Hamish<br>Author-X-Name-Last: Low<br>Author-Email: Hamish.Low@econ.cam.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Trinity College, Cambridge<br>Author-Name: Ian Preston<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Preston<br>Author-Email: i.preston@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200410<br>Length: 27 pp.<br>Number: W04/26<br>Abstract: This paper assesses the accuracy of decomposing income risk into permanent and transitory components using income and consumption data. We develop a specific approximation to the optimal consumption growth rule and use Monte Carlo evidence to show that this
approximation can provide a robust method for decomposing income risk. The availability of asset data enables the use of a more accurate approximation allowing for partial self-insurance against permanent shocks. We show that the use of data on median asset holdings corrects much of the error in the simple approximation which assumes no self-insurance against permanent shocks.<br>Classification-JEL: C30, D52, D91<br>Keywords: income risk, inequality, approximation methods, con-<br>File-URL:http://www.ifs.org.uk/wps/wp0426.pdf<br>File-Format: application/pdf<br>File-Size: 235<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/25<br>Title: Changes in the distribution of male and female wages accounting for employment composition using bounds<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Amanda Gosling<br>Author-X-Name-First: Amanda<br>Author-X-Name-Last: Gosling<br>Author-Email: ag251@kent.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Kent<br>Author-Name: Hidehiko Ichimura<br>Author-X-Name-First: Hidehiko<br>Author-X-Name-Last: Ichimura<br>Author-Email:  ichimura@e.u-tokyo.ac.jp<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Tokyo<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Creation-Date: 200409<br>Length: 49 pp.<br>Number: W04/25<br>Abstract: This paper examines changes in the distribution of wages using bounds to allow for the impact of non-random selection into work. We show that bounds constructed without any economic or statistical assumptions can be informative. However, since employment rates in the UK are often low they are not informative about changes in educational or gender wage differentials. Thus we explore ways to tighten these bounds using restrictions motivated from economic theory. With these assumptions we find convincing evidence of an increase in inequality within education groups, changes in the "return" to education and increases in the relative wages of women.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0425.pdf<br>File-Format: application/pdf<br>File-Size: 437<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/24<br>Title: Comparative advantage and heterogeneous firms<br>Author-Name: Andrew Bernard<br>Author-X-Name-First: Andrew<br>Author-X-Name-Last: Bernard<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Dartmouth University<br>Author-Name: Stephen Redding<br>Author-X-Name-First: Stephen<br>Author-X-Name-Last: Redding<br>Author-Email: s.j.redding@lse.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Peter Schott<br>Author-X-Name-First: Peter<br>Author-X-Name-Last: Schott<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Creation-Date: 200407<br>Length: 59 pp.<br>Number: W04/24<br>Abstract: This paper presents a model of international trade that features heterogeneous firms, relative endowment differences across countries, and consumer taste for variety. The paper demonstrates that firm reactions to trade liberalization generate endogenous Ricardian productivity responses at the industry level that magnify countries' comparative advantage. Focusing on the wide range of firm-level reactions to falling trade costs, the model also shows that, as trade costs fall, firms in comparative advantage industries are more likely to export, that relative firm size and the relative number of firms increases more in comparative advantage industries and that job turnover is higher in comparative advantage industries than in comparative disadvantage industries.<br>Classification-JEL: F11, F12, L11<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0424.pdf<br>File-Format: application/pdf<br>File-Size: 754<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/23<br>Title: Immigrant health: selectivity and acculturation<br>Author-Name:  Guillermina Jasso<br>Author-X-Name-First: Guillermina<br>Author-X-Name-Last:  Jasso<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Douglas S. Massey<br>Author-X-Name-First: Douglas<br>Author-X-Name-Last:  Massey<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Mark R. Rosenzweig<br>Author-X-Name-First: Mark<br>Author-X-Name-Last:  Rosenzweig<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  James P. Smith<br>Author-X-Name-First: James<br>Author-X-Name-Last:  Smith<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200401<br>Length: 48 pp.<br>Number: W04/23<br>Abstract: <br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0423.pdf<br>File-Format: application/pdf<br>File-Size: 481<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/22<br>Title: Foreign ownership and productivity: new evidence from the service sector and the R&D lab<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Stephen Redding<br>Author-X-Name-First: Stephen<br>Author-X-Name-Last: Redding<br>Author-Email: s.j.redding@lse.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Helen Simpson<br>Author-X-Name-First: Helen<br>Author-X-Name-Last: Simpson<br>Author-Email: helen.simpson@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and CMPO, Bristol<br>Creation-Date: 200408<br>Length: 32 pp.<br>Number: W04/22<br>Abstract: This paper examines the relationship between foreign ownership and
productivity, paying particular attention to two issues neglected in the existing literature ֍
the role of multinationals in service sectors and the importance of R&D activity conducted
by foreign multinationals. We review existing theoretical and empirical work, which
largely focuses on manufacturing, before presenting new evidence using establishmentlevel
data on production, service and R&D activity for the United Kingdom. We find that
multinationals play an important role in service sectors and that entry of foreign
multinationals by takeover is more prevalent than greenfield investment. We find that
British multinationals have lower levels of labour productivity than foreign multinationals,
but the difference is less stark in the service sector than in the production sector, and that
British multinationals have lower levels of investment and intermediate use per employee.
We also find that foreign-owned multinationals conduct a substantial amount of UK R&D.
We discuss the implications of these and other findings for the policy debate on incentives
to influence multinational firms' location choices.<br>Classification-JEL: F23, O47, L60, L80<br>Keywords: Foreign Investment, Productivity, Knowledge Spillovers<br>File-URL:http://www.ifs.org.uk/wps/wp0422.pdf<br>File-Format: application/pdf<br>File-Size: 303<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/21<br>Title: An assessment of PenSim2<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Howard Reed<br>Author-X-Name-First: Howard<br>Author-X-Name-Last: Reed<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Andrew Shephard<br>Author-X-Name-First: Andrew<br>Author-X-Name-Last: Shephard<br>Author-Email: a.shephard@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200412<br>Length: 51 pp.<br>Number: W04/21<br>Abstract: The Department for Work and Pensions (DWP)&rsquo;s Pensim2 model is a dynamic microsimulation model. The principal purpose of this model is to estimate the future distribution of pensioner incomes, thus enabling analysis of the distributional effects of proposed changes to pension policy. This paper presents the results of an assessment of Pensim2 by researchers at the IFS. We start by looking at the overall structure of the model, and how it compares with other dynamic policy analysis models across the world. We make recommendations at this stage as to how the overall modelling strategy could be improved. We then go on to analyse the characteristics of most of the individual modules which make up Pensim2, examining the data used and the regression and predictions used in each step. The results from this examination are used to formulate a set of short and medium-term recommendations for developing and improving the model. Finally, we look at what might become possible for the model over a much longer time frame � looking towards developing a &lsquo;Pensim3&rsquo; model over the next decade or so.<br>Classification-JEL: H55<br>Keywords: pensions; microsimulation; policy analysis<br>File-URL:http://www.ifs.org.uk/wps/wp0421.pdf<br>File-Format: application/pdf<br>File-Size: 397<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/20<br>Title: Understanding the effects of early motherhood in Britain: the effects on mothers<br>Author-Name: Alissa Goodman<br>Author-X-Name-First: Alissa<br>Author-X-Name-Last: Goodman<br>Author-Email: a.goodman@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Greg Kaplan<br>Author-X-Name-First: Greg<br>Author-X-Name-Last: Kaplan<br>Author-Email: g.kaplan@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Ian Walker<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Walker<br>Author-Email: ian.walker@lancaster.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Lancaster University<br>Creation-Date: 200408<br>Length: 43 pp.<br>Number: W04/20<br>Abstract: This paper examines the socio-economic consequences of teenage motherhood for a cohort of British women born in 1970. We apply a number of different methodologies on the same dataset, including OLS, a propensity score matching estimator, and an instrumental variables estimator, using miscarriages as an instrument. We bound the biases introduced through IV due to non-randomness, and misreporting of the instrument. Our results are sensitive to the methodologies used. Taking only observed characteristics into account, the effects of teenage motherhood appear large and negative. The pathways are through bigger family size, and negative labour market outcomes for the mother and her partner, and are mitigated by transfers from the state through the British benefit system. Our IV estimates show that almost all these effects are reduced to zero once unobserved heterogeneity is taken into account. However our IV bounds show that biases introduced by non-randomness and misreporting of our instrument could be responsible for all of this apparent reduction in effects.<br>Classification-JEL: J31<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0420.pdf<br>File-Format: application/pdf<br>File-Size: 555<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/19<br>Title: Can education compensate for low ability? Evidence from British data<br>Author-Name: Kevin Denny<br>Author-X-Name-First: Kevin<br>Author-X-Name-Last: Denny<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College Dublin<br>Author-Name:  Vincent O'Sullivan<br>Author-X-Name-First: Vincent<br>Author-X-Name-Last:  O'Sullivan<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200408<br>Length: 9 pp<br>Number: W04/19<br>Abstract: This paper uses cross section data to investigate whether the returns to education vary with the level of ability. Using a measure of cognitive ability based on tests taken at ages 7 and 11 we find, unlike most of the existing literature, clear evidence that the return to schooling is lower for those with higher ability indicating that education can act as a substitute for observed ability. We also estimate quantile regression functions to examine how the return to schooling varies across the conditional distribution of earnings. The results show that the return is lower for higher quantiles, suggesting that education is also a substitute for unobserved ability.<br>Classification-JEL: J31<br>Keywords: Earnings, education, ability<br>File-URL:http://www.ifs.org.uk/wps/wp0419.pdf<br>File-Format: application/pdf<br>File-Size: 94<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/18<br>Title: Child support liability and partnership dissolution<br>Author-Name: Ian Walker<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Walker<br>Author-Email: ian.walker@lancaster.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Lancaster University<br>Author-Name:  Yu Zhu<br>Author-X-Name-First: Yu<br>Author-X-Name-Last:  Zhu<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200407<br>Length: 34 pp.<br>Number: W04/18<br>Abstract: This paper studies the determinants of partnership dissolution and focuses on the role of child support. We exploit the variation in child support liabilities driven by an important UK policy reform to separately identify the effects of children from the effect of child support liability. We find strong evidence that an increase in the child support liability significantly reduces dissolution risk. Our results suggest that child support criteria that are based on the non-custodial parent's income, compared to criteria based on aggregate incomes of both parents, would imply much smaller separation rates.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0418.pdf<br>File-Format: application/pdf<br>File-Size: 237<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/17<br>Title: Necessary and sufficient conditions for latent separability<br>Author-Name: Ian Crawford<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Crawford<br>Author-Email: Ian.Crawford@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Oxford<br>Creation-Date: 200406<br>Length: 5 pp.<br>Number: W04/17<br>Abstract: This paper extends the nonparametric methods developed by Samuelson (1948), Houthakker (1950), Afriat (1973), Diewert (1973) and Varian (1982, 1983) to latently separable models. It presents necessary and sufficient empirical conditions under which data on the market behaviour of a price-taking consumer, and a hypothesised allocation across latent groups are nonparametrically consistent with latent separability (Gorman (1968, 1978), Blundell and Robin (2000)). It considers homothetic latent separability and weak separability as special cases.<br>Keywords: <br>File-URL:http://cemmap.ifs.org.uk/wps/cwp0402.pdf<br>File-Format: application/pdf<br>File-Size: 413<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/16<br>Title: The role of employment experience in explaining the gender wage gap <br>Author-Name: Michal Myck<br>Author-X-Name-First: Michal<br>Author-X-Name-Last: Myck<br>Author-Email: see DIW-Berlin website: <a href="http://www.diw.de">www.diw.de</a>@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and DIW-Berlin<br>Author-Name: Gillian Paull<br>Author-X-Name-First: Gillian<br>Author-X-Name-Last: Paull<br>Author-Email: gill_p@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200407<br>Length: 42 pp.<br>Number: W04/16<br>Abstract: The wage gap between male and female workers has narrowed in both the US and the UK over the past twenty five years. At the same time, employment rates for men and
women have converged. This paper examines the relationship between these two facts by
analysing the role played by labour market experience in explaining the narrowing gender
wage gap.</p>

<p>We analyse the relationships between male and female levels of experience and
relative wages in the US and the UK over the period 1978 to 2000. The estimation
procedure is based on pseudo panels created from cross-sectional data (Current
Population Survey (CPS) for the US and Family Expenditure Survey (FES) for the UK).
Possible biases from unobserved heterogeneity and the endogeneity of experience are
addressed by using an &lsquo;imputed&rsquo; measure of experience based on grouped data and by
estimating the wage regressions in first differences.</p>

<p>Differences in levels of experience are found to explain 39 percent of the gender
wage gap in the US and 37 percent in the UK, and failure to control for unobserved
heterogeneity is found to understate the role played by total experience in explaining the
gap. The gender wage gap has diminished over recent successive cohorts of workers.
However, the evidence suggests that the improvements in relative female wages can�t be
attributed to changes in relative levels of experience. For each of the successive cohorts
we examine, total experience increases the gender wage ratio by a constant 8 to 9
percentage points in the US and the UK. We find that the average experience for female
workers relative to male workers has increased over successive cohorts. However, this
has either been insufficient to lead to a noticeable effect on relative wages, or changes in
the returns to experience have altered affecting female relative earnings unfavourably.<br>Classification-JEL: J16, J41, C23<br>Keywords: gender wage gap, returns to experience, artificial panel data<br>File-URL:http://www.ifs.org.uk/wps/wp0416.pdf<br>File-Format: application/pdf<br>File-Size: 519<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/15<br>Title: Changes in the world distribution of output-per-worker 1960-98: how a standard decomposition tells an unorthodox story<br>Author-Name:  Paul Beaudry<br>Author-X-Name-First: Paul<br>Author-X-Name-Last:  Beaudry<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Fabrice Collard <br>Author-X-Name-First: Fabrice<br>Author-X-Name-Last:  <br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  David A. Green<br>Author-X-Name-First: David<br>Author-X-Name-Last:  Green<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200409<br>Length: 48 pp.<br>Number: W04/15<br>Abstract: Why have some countries done so much better than others over the recent past? In order to shed new light on this issue, this paper provides a decomposition of the change in the distribution of output-per-worker across countries over the period 1960-98. The main finding of the paper is that most of the change in shape of the world distribution of income between 1960-1998 can be accounted for by a very substantial and previously unrecognized change in the parameters driving the growth process. In particular, we show that the role of capital deepening forces - that is the role of investment rates and population growth in affecting output - increased dramatically over the period 1978-98 versus 1960-78, and that this increase can account for almost all the observed changes in the world distribution. In contrast, we do not find any significant effects coming through non-linear convergence mechanisms or increased importance of education; both of which have played prominent roles in recent discussion of economic performance. Our results therefore highlight that the period 1978-98 was particularly advantageous to countries which strongly favored capital accumulation and hence suggests that research aimed at understanding recent differences in economic performances across countries needs to focus on explaining why the social returns to physical capital accumulation where abnormally high over the period 1978-98.<br>Classification-JEL: O33, O41<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0415.pdf<br>File-Format: application/pdf<br>File-Size: 652<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/14<br>Title: Breaking the cycle? The effect of education on welfare receipt among children of welfare recipients<br>Author-Name:  Michael B. Coelli<br>Author-X-Name-First: Michael<br>Author-X-Name-Last:  Coelli<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  David A. Green<br>Author-X-Name-First: David<br>Author-X-Name-Last:  Green<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  William P. Warburton<br>Author-X-Name-First: William<br>Author-X-Name-Last:  Warburton<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200406<br>Length: 69 pp.<br>Number: W04/14<br>Abstract: We examine the impact of high school graduation on the probability individuals from welfare
backgrounds use welfare themselves. Our data consists of administrative educational records for
grade 12 students in a Canadian province linked with their own and their parents' welfare records.
We address potential endogeneity problems by: 1) controlling for ability using past test scores; 2)
using an instrument for graduation based on school principal fixed effects; and 3) using a Heckman-
Singer type unobserved heterogeneity estimator. Graduation would reduce welfare receipt of dropoutsby ݠto 3/4. Effects are larger for individuals from troubled family backgrounds and low income neighbourhoods.<br>Classification-JEL: I38, I21<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0414.pdf<br>File-Format: application/pdf<br>File-Size: 640<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/13<br>Title: Immigrant earnings profiles in the presence of human capital investment: measuring cohort and macro effects<br>Author-Name:  David A. Green<br>Author-X-Name-First: David<br>Author-X-Name-Last:  Green<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Christopher Worswick<br>Author-X-Name-First: Christopher<br>Author-X-Name-Last:  Worswick<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200401<br>Length: 48 pp.<br>Number: W04/13<br>Abstract: Considering immigrant earnings in the context of post-arrival human capital investment implies: cohort quality should be defined in terms of the present value of the whole earnings profile; and, an appropriate definition of �macro� effects is obtained using the earnings profile of the native
born cohort entering the labour market at the same time as an immigrant cohort. We illustrate this using Canadian immigrant earnings, where there were large cross-cohort earnings declines in the 1980s and 1990s. We find that changes affecting all new entrants play an important role in understanding immigrant earnings. In contrast, earlier approaches imply that �macro� events explain little of immigrant earnings patterns.<br>Classification-JEL: J61, J31<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0413.pdf<br>File-Format: application/pdf<br>File-Size: 640<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/12<br>Title: The roles of expected profitability, Tobin's Q and cash flow in econometric models of company investment<br>Author-Name: Steve Bond<br>Author-X-Name-First: Steve<br>Author-X-Name-Last: Bond<br>Author-Email: steve.bond@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Nuffield College, Oxford<br>Author-Name: Alexander Klemm<br>Author-X-Name-First: Alexander<br>Author-X-Name-Last: Klemm<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name:  Rain Newton-Smith<br>Author-X-Name-First: Rain<br>Author-X-Name-Last:  Newton-Smith<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Murtaza Syed<br>Author-X-Name-First: Murtaza<br>Author-X-Name-Last: Syed<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name:  Gertjan Vlieghe<br>Author-X-Name-First: Gertjan<br>Author-X-Name-Last:  Vlieghe<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200406<br>Length: 43 pp<br>Number: W04/12<br>Abstract: Evidence that cash flow has a significant effect on company investment spending, after controlling for Tobin's average Q, has often been interpreted as suggesting the importance of financing constraints. Recent work on measurement error in the Q model casts doubt on this interpretation. It is possible that the Q model may not be identified if there are Ѣubbles' in stock market valuations that are both persistent over time and that are correlated with fundamental values. Cash flow may then provide additional information about expected profitability that is not captured by a poorly measured Tobin's average Q variable. We explore this hypothesis empirically using UK panel data on companies for which analysts' earnings forecasts are available from the
IBES database. The results point to a severe measurement error in average Q. The paper finds that, controlling for expected profitability using analysts' earnings forecasts, cash flow becomes insignificant. Both sales growth and cash-stock variables do provide additional information,
which could either be capturing expectations of profitability at longer horizons, or reflect misspecification of the basic Q model. Results for subsamples do not suggest financing constraints as a likely explanation for these findings.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0412.pdf<br>File-Format: application/pdf<br>File-Size: 381<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/11<br>Title: Stamp duty on shares and its effect on share prices<br>Author-Name: Steve Bond<br>Author-X-Name-First: Steve<br>Author-X-Name-Last: Bond<br>Author-Email: steve.bond@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Nuffield College, Oxford<br>Author-Name:  Mike Hawkins<br>Author-X-Name-First: Mike<br>Author-X-Name-Last:  Hawkins<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Alexander Klemm<br>Author-X-Name-First: Alexander<br>Author-X-Name-Last: Klemm<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200406<br>Length: 23 pp<br>Number: W04/11<br>Abstract: This paper provides a discussion of stamp duty and its effects. This is followed by an empirical study using changes in the rate of stamp duty in the UK as natural experiments. Because shares will be affected differently depending on how frequently they are traded, we can employ a
difference-in-differences methodology. We find that the announcements of cuts in stamp duty
had a significant and positive effect on the price of more frequently traded shares compared to
other shares. As expected under the efficient markets hypothesis, the implementation of cuts
(when at a different date from the announcement) did not affect returns differentially.<br>Classification-JEL: G14, H29, E62<br>Keywords: Stamp duty, transaction tax, Tobin-tax, natural experiment, tax reform<br>File-URL:http://www.ifs.org.uk/wps/wp0411.pdf<br>File-Format: application/pdf<br>File-Size: 173<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/10<br>Title: Educational reform, ability and family background<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name:  M&aring;rten Palme<br>Author-X-Name-First: M&aring;rten<br>Author-X-Name-Last:  Palme<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200405<br>Length: 17 pp.<br>Number: W04/10<br>Abstract: In this paper we evaluate the impact of a major school reform, that took place in the 1950s in Sweden, on educational attainment and earnings. The reform, which has many common elements with reforms in other European countries including the UK, consisted of increasing compulsor schooling, imposing a national curriculum and abolishing selectionby ability into Academic and non-academic streams at the age of 12 (comprehensive school reform). Our data combines survey data with administrative sources. We find that the reform increased both the educational attainment and the earnings of children whose fathers had just complusory education. However the earnings of those with educated parents declined - possibly because of a dilution of quality at the top end of the education levels. The overall effect of the reform was however positive.<br>Classification-JEL: H52, I21, I28, J24, J31<br>Keywords: Human capital, evaluation of education reform, comprehensive schools, compulsory schooling, earnings, administrative data, differences in differences<br>File-URL:http://www.ifs.org.uk/wps/wp0410.pdf<br>File-Format: application/pdf<br>File-Size: 218<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/09<br>Title: Labour market participation and mortgage related borrowing constraints<br>Author-Name: Renata Bottazzi<br>Author-X-Name-First: Renata<br>Author-X-Name-Last: Bottazzi<br>Author-Email: r.bottazzi@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200401<br>Length: 28 pp<br>Number: W04/09<br>Abstract: This paper analyses the relationship between female labour market participation and  mortgage commitments in life-cycle set up. In particular it examines whether a mortgage  qualification constraint has any effect on female labour market participation. This is done by  conditioning on the mortgage decision in a labour market participation equation for married  women. Endogeneity of the mortgage variable is tested using house price data. Panel data from the  British Household Panel Study is used in order to control for unobserved heterogeneity in  participation.<br>Classification-JEL: J40, D91<br>Keywords: Mortgages, labour market participation, women<br>File-URL:http://www.ifs.org.uk/wps/wp0409.pdf<br>File-Format: application/pdf<br>File-Size: 659<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/08<br>Title: Education, earnings and skills: a multi-country comparison<br>Author-Name: Kevin Denny<br>Author-X-Name-First: Kevin<br>Author-X-Name-Last: Denny<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College Dublin<br>Author-Name:  Colm Harmon<br>Author-X-Name-First: Colm<br>Author-X-Name-Last:  Harmon<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Vincent O'Sullivan<br>Author-X-Name-First: Vincent<br>Author-X-Name-Last:  O'Sullivan<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200404<br>Length: 28 pp<br>Number: W04/08<br>Abstract: This paper uses the measures of basic skills (or functional literacy) in the
 International Adult Literacy Survey to examine the impact of education and basic
 skills on earnings across a large number of countries. We show that the
 estimated return to formal education is sensitive to the inclusion of these
 measures: excluding them biases the return to education upwards in many
 countries to a significant degree, usually 1 or 2 percentage points. In almost all
 countries, the test scores have a well-determined effect on earnings although
 there is considerable variation in the size of the effect. The highest returns to
 skills tend to be in English speaking countries. Comparing results across
 countries, the returns to education and the returns to basic skills are not
 correlated. The evidence suggests that there is considerable benefit in many
 countries for policy intervention to increase the skill levels of workers. This should
 not just be directed at dealing with low-skilled individuals � there are gains across
 the skills distribution.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0408.pdf<br>File-Format: application/pdf<br>File-Size: 337<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/07<br>Title: Can the retirement consumption puzzle be solved?<br>Author-Name: Sarah Smith<br>Author-X-Name-First: Sarah<br>Author-X-Name-Last: Smith<br>Author-Email: sarah.smith@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Centre for Market and Public Organisation<br>Creation-Date: 200403<br>Length: 28 pp<br>Number: W04/07<br>Abstract: This paper uses UK panel data to shed further light on the fall in spending at
 retirement (the �retirement-consumption puzzle�). It compares the profiles of
 spending and well-being at retirement for different groups, defined according to
 whether retirement is voluntary or involuntary. Where retirement is voluntary, food
 spending and individual well-being are largely smoothed through retirement; where
 retirement is involuntary, both food spending and well-being fall. This is consistent
 with the retirement consumption puzzle being linked to negative wealth shocks.
 However, there remains one group for whom retirement appears to be voluntary, yet
 whose spending falls. Fully resolving the puzzle requires a better understanding of
 how the nature of retirement links to spending and of how different groups substitute
 leisure for consumption.<br>Classification-JEL: D91<br>Keywords: Retirement spending, panel data<br>File-URL:http://www.ifs.org.uk/wps/wp0407.pdf<br>File-Format: application/pdf<br>File-Size: 196<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/06<br>Title: Agglomeration, regional grants and firm location<br>Author-Name: Michael Devereux<br>Author-X-Name-First: Michael<br>Author-X-Name-Last: Devereux<br>Author-Email: michael.devereux@sbs.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Oxford<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Helen Simpson<br>Author-X-Name-First: Helen<br>Author-X-Name-Last: Simpson<br>Author-Email: helen.simpson@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and CMPO, Bristol<br>Creation-Date: 200403<br>Length: 28 pp<br>Number: W04/06<br>Abstract: We examine whether discretionary government grants influence the location of new plants, and how effective these incentives are in the presence of agglomeration and urbanisation externalities. We find evidence that regional industrial structure affects the location of new entrants. Firms in more agglomerated industries locate new plants near to others in the same industry. Firms are also attracted to industrially diversified locations. Foreign multinationals locate new plants near to other foreign-owned plants in the same industry. Fiscal incentives in the form of grants are found to have some effect in attracting plants to specific geographic areas eligible for such aid.<br>Classification-JEL: R12, R3<br>Keywords: Corporation tax<br>File-URL:http://www.ifs.org.uk/wps/wp0406.pdf<br>File-Format: application/pdf<br>File-Size: 196<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/05<br>Title: What has been the tax competition experience of the past 20 years?<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Alexander Klemm<br>Author-X-Name-First: Alexander<br>Author-X-Name-Last: Klemm<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200402<br>Length: 28 pp<br>Number: W04/05<br>Abstract: This paper describes tax reforms in OECD countries over the last 20 years and how they are related to tax competition. Both individual countries' reforms and multilateral initiatives and developments are covered. This is followed by an overview of the empirical evidence on tax competition. Our conclusion is that the evidence for some interdependence in tax setting behaviour is strong, although the exact process driving this remains unclear. While the most basic tax competition models fail to explain the development in OECD countries, there is more than one possible explanation for the reforms undertaken if more advanced models are considered. The multilateral initiatives that were implemented however do not seem to be related to resource-based tax competition, instead they are about taxing rights.<br>Classification-JEL: H25<br>Keywords: Corporation tax<br>File-URL:http://www.ifs.org.uk/wps/wp0405.pdf<br>File-Format: application/pdf<br>File-Size: 524<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/04<br>Title: How has the UK corporation tax raised so much revenue?<br>Author-Name: Michael Devereux<br>Author-X-Name-First: Michael<br>Author-X-Name-Last: Devereux<br>Author-Email: michael.devereux@sbs.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Oxford<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Alexander Klemm<br>Author-X-Name-First: Alexander<br>Author-X-Name-Last: Klemm<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200402<br>Length: 28 pp<br>Number: W04/04<br>Abstract: We analyse a puzzle in the UK corporation tax: by both historic and international
 standards corporation tax revenues have been high while the statutory rate has been low.
 Possible explanations include the following: changes in tax law that may have increased
 effective tax rates; other factors such as higher profitability or different macro-economic
 conditions may have led to higher effective tax rates; and finally the size of the corporate
 sector may have increased. We find evidence for all three explanations, although none
 would be sufficient in itself. To the extent that higher profits, particularly financial sector
 profits may have led to high revenues, there are doubts as to whether revenues will
 continue to be so strong.<br>Classification-JEL: H25<br>Keywords: Corporation tax, revenue<br>File-URL:http://www.ifs.org.uk/wps/wp0404.pdf<br>File-Format: application/pdf<br>File-Size: 291<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/03<br>Title: Valuing a new good<br>Author-Name: Laura Blow<br>Author-X-Name-First: Laura<br>Author-X-Name-Last: Blow<br>Author-Email: l.blow@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200401<br>Length: 15 pp<br>Number: W04/03<br>Abstract: This paper presents a nonparametric method for calculating a lower bound on the virtual or reservation price of a new good. This allows the welfare effects of product market innovations to be investigated. We illustrate the technique using consumer panel data.<br>Classification-JEL: C43, D11<br>Keywords: New goods, revealed preferences<br>File-URL:http://www.ifs.org.uk/wps/wp0403.pdf<br>File-Format: application/pdf<br>File-Size: 276<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/02<br>Title: Unravelling the SES health connection<br>Author-Name:  James P. Smith<br>Author-X-Name-First: James<br>Author-X-Name-Last:  Smith<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200401<br>Length: 38 pp<br>Number: W04/02<br>Abstract: This paper looks at the links between health and socio-economic status. It is generally assumed by non-economists that it is low SES that causes ill health, but this paper asks whether the causation might also work the other way. Even if the direction of causation is that SES mainly affects health, what dimensions of SES actually matter � the financial aspects such as income or wealth or nonfinancial dimensions like education? Finally, is there a life course component to the health gradient so that we may be misled in trying to answer these questions by only looking at people of a certain age � say those past 50. This paper provides my answers to these questions.<br>Classification-JEL: I12, I18, I31<br>Keywords: Health, socio-economic status, causation<br>File-URL:http://www.ifs.org.uk/wps/wp0402.pdf<br>File-Format: application/pdf<br>File-Size: 476<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:04/01<br>Title: A retrospective on Friedman's theory of permanent income<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Creation-Date: 200401<br>Length: 27 pp<br>Number: W04/01<br>Abstract: Friedman's book on the Ӄonsumption FunctionԠis one of the great works of Economics demonstrating  how the interplay between theoretical ideas and data analysis could lead to major policy implications. We present a short review of Friedman's Permanent Income Hypothesis, the origins of the idea and its theoretical foundations. We give a brief overview of its influence in modern economics and discuss some relevant empirical results and the way they relate to the original approach taken by Friedman.<br>Classification-JEL: B31, D11, H30<br>Keywords: Friedman, consumption function, permanent income hypothesis<br>File-URL:http://www.ifs.org.uk/wps/wp0401.pdf<br>File-Format: application/pdf<br>File-Size: 176<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/22<br>Title: Consequences and predictors of new health events<br>Author-Name:  James P. Smith<br>Author-X-Name-First: James<br>Author-X-Name-Last:  Smith<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200310<br>Length: 41 pp.<br>Number: W03/22<br>Abstract: There is renewed interest in why people of lower socio-economic status (SES) have worse health outcomes. No matter which measures of SES are used (income, wealth, or education), the evidence that this association is large is abundant (Marmot (1999), Smith (1999)).
The relation between SES and health appears also to be pervasive over time and across countries
at quite different levels of economic development (Kitagawa and Hauser (1973), Townsend et al.
(1988)). Considerable debate remains about why the relation arises and what the principal
directions of causation might be ((Smith (1999), Adams et al. (2003), Deaton (2003)). However,
many analytical difficulties exist when one tries to understand its meaning. These difficulties
include the complex dimensionality of health status that produces considerable heterogeneity in
health outcomes, the two-way interaction between health and economic status, and the separation
of anticipated from unanticipated health or economic shocks.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0322.pdf<br>File-Format: application/pdf<br>File-Size: 279<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/21<br>Title: An examination of the IFS corporation tax forecasting record<br>Author-Name:  Suman Basu<br>Author-X-Name-First: Suman<br>Author-X-Name-Last:  Basu<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Christine Frayne<br>Author-X-Name-First: Christine<br>Author-X-Name-Last: Frayne<br>Author-Email: Christine.FRAYNE@ec.europa.eu<br>Author-Workplace-Name: Institute for Fiscal Studies and European Commission (formerly IFS staff)<br>Creation-Date: 200311<br>Length: 36 pp<br>Number: W03/21<br>Abstract: &lt;p&gt;This paper examines the corporation tax forecasting techniques used by the Institute for Fiscal Studies. For current year forecasts a judgemental forecast is found to have performed better than relying solely on a simple model or information on the receipts available so far in the current financial year. For longer time horizons the judgemental forecast has performed slightly less well than the modelled forecast. While forecasts made later in the financial year have led to more accurate estimates of receipts in the current year no evidence is found that this has improved the accuracy of longer run forecasts. In the short term inaccuracies in the modelling process are found to be more important than errors in forecasting growth in corporate profits. However the latter is still an important component of errors and one that grows substantially in relative importance as the forecast horizon increases.&lt;/p&gt;<br>Classification-JEL: E62, H25<br>Keywords: Corporate Tax; Forecasting, government revenue<br>File-URL:http://www.ifs.org.uk/wps/wp0321.pdf<br>File-Format: application/pdf<br>File-Size: 266<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/20<br>Title: Evaluating the impact of education on earnings in the UK: Models, methods and results from the NCDS<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Lorraine Dearden<br>Author-X-Name-First: Lorraine<br>Author-X-Name-Last: Dearden<br>Author-Email: l.dearden@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London<br>Author-Name: Barbara Sianesi<br>Author-X-Name-First: Barbara<br>Author-X-Name-Last: Sianesi<br>Author-Email: b.sianesi@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200311<br>Length: 52 pp<br>Number: W03/20<br>Abstract: Regression, matching, control function and instrumental variables methods for recovering the impact of education on individual earnings are reviewed for single treatment and sequential multiple treatments with and without heterogeneous returns. The sensitivity of the estimates once applied to a common dataset is then explored. We show the importance of correcting for detailed test score and family background differences and of allowing for (observable) heterogeneity in returns. We find an average return of 27% for those completing higher education versus anything less. Compared to stopping at 16 without qualifications, we find an average return to O-levels of 18%, to A-levels of 24% and to higher education of 48%.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0320.pdf<br>File-Format: application/pdf<br>File-Size: 382<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/19<br>Title: Variations in the price of foods and nutrients in the UK<br>Author-Name: Ian Crawford<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Crawford<br>Author-Email: Ian.Crawford@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Oxford<br>Creation-Date: 200310<br>Length: 23 pp<br>Number: W03/19<br>Abstract: This paper investigates the patterns and extent of differences in the prices paid for foods, and for the nutrients they contain, amongst households in the UK. The data used are from the National Food Survey and are unit prices, quantities purchased and nutrient conversion factors for each food. The paper first describes the circumstances under which ratios of unit prices are exact measures of cross section price variation. It also discusses a nonparametric method of recovering the underlying prices of nutrients under the maintined assumption that households have rational preferences over the nutritional characteristics of foods. It then uses these data to describe patterns in the variation of the price of food and nutrients with repect to household and regional characteristics.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0319.pdf<br>File-Format: application/pdf<br>File-Size: 330<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/18<br>Title: Demographics in demand systems<br>Author-Name: Laura Blow<br>Author-X-Name-First: Laura<br>Author-X-Name-Last: Blow<br>Author-Email: l.blow@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200310<br>Length: 25 pp<br>Number: W03/18<br>Abstract: &lt;p&gt;Household composition can be expected to affect the allocation of household expenditure among goods, at the very least because of economies of scale as household size increases and because different people have different needs (adults versus children, for example). Specifying demographic effects correctly in demand analysis is important both in order to estimate correct price and expenditure elasticities and for the purpose of making household welfare comparisons. A common way of including demographics is as a function that scales total expenditure, and to make this scaling function indepen- dent of the level of total expenditure. A popular method in the parametric estimation of demand systems is to estimate share equations that are quadratic in the logarithm of total expenditure, but there is also a substantial literature on the semi-parametric estimation of Engel curves. We employ some of these semi-parametric techniques to show that, for some goods, further terms are likely to be required in the Engel curve addition to quadratic terms. We use this to identify the parameters of a scaling function that varies with total expenditure.&lt;/p&gt;&lt;p&gt;Keywords: Demand analysis, demographics, base independence, semi-parametric.&lt;/p&gt;<br>Classification-JEL: D14, D11, D12<br>Keywords: Demand analysis, demographics, base independence, semi-parametric<br>File-URL:http://www.ifs.org.uk/wps/wp0318.pdf<br>File-Format: application/pdf<br>File-Size: 995<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/17<br>Title: Relative wage variation and industry location<br>Author-Name: Andrew Bernard<br>Author-X-Name-First: Andrew<br>Author-X-Name-Last: Bernard<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Dartmouth University<br>Author-Name: Stephen Redding<br>Author-X-Name-First: Stephen<br>Author-X-Name-Last: Redding<br>Author-Email: s.j.redding@lse.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Peter Schott<br>Author-X-Name-First: Peter<br>Author-X-Name-Last: Schott<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name: Helen Simpson<br>Author-X-Name-First: Helen<br>Author-X-Name-Last: Simpson<br>Author-Email: helen.simpson@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and CMPO, Bristol<br>Creation-Date: 200309<br>Length: 26 pp<br>Number: W03/17<br>Abstract: Relative wages vary considerably across regions of the United Kingdom, with skill-abundant regions exhibiting lower skill premia than skill-scarce regions. This paper shows that the location of economic activity is correlated with the variation in relative wages. U.K. regions with low skill premia produce different sets of manufacturing industries than regions with high skill premia. Relative wages are also linked to subsequent economic development: over time, increases in the employment share of skill-intensive industries are greater in regions with lower initial skill premia. Both results suggest firms adjust production across and within regions in response to relative wage differences.<br>Classification-JEL: F11, F14, C14<br>Keywords: Deindustrialization, Relative Factor Prices, Diversification Cones<br>File-URL:http://www.ifs.org.uk/wps/wp0317.pdf<br>File-Format: application/pdf<br>File-Size: 291<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/16<br>Title: The effects of human capital on social capital: a cross-country analysis<br>Author-Name: Kevin Denny<br>Author-X-Name-First: Kevin<br>Author-X-Name-Last: Denny<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College Dublin<br>Creation-Date: 200309<br>Length: 21 pp<br>Number: W03/16<br>Abstract: This paper uses two sets of cross-country micro datasets to analyse individuals' participation in voluntary and community activities and organisations. Analysing countries in the International Adult Literacy Survey and focusing on the impact of human capital I find a consistently positive effect of years of education on participation with the marginal effect of an additional year being around 2 or 3% for most countries. The effects are somewhat higher in English speaking countries. However controlling for functional literacy reduces this significantly with literacy accounting for around half the marginal effect of education. Labour market effects are generally very weak Using instrumental variables for a subset of countries we test and are unable to reject the hypothesis that education is exogenous. Using Eurobarometer data yields higher estimated impacts of schooling for most countries. It is also shown how attitudes towards the Ӵhird sectorԠpredict higher participation in some forms of volunteering while a measure of religiosity often predicts more altruistic volunteering.<br>Classification-JEL: D63<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0316.pdf<br>File-Format: application/pdf<br>File-Size: 143<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/15<br>Title: The effect on inequality of changing one or two incomes<br>Author-Name:  Peter J. Lambert<br>Author-X-Name-First: Peter<br>Author-X-Name-Last:  Lambert<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Giuseppe Lanza<br>Author-X-Name-First: Giuseppe<br>Author-X-Name-Last:  Lanza<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200307<br>Length: 27 pp<br>Number: W03/15<br>Abstract: We examine the effect on inequality of increasing one income, and show that for two wide classes of indices a benchmark income level or position exists, dividing upper from lower incomes, such that if a lower income is raised, inequality falls, and if an upper income is raised, inequality rises. We provide a condition on the inequality orderings implicit in two inequality indices under which the one has a lower benchmark than the other for all unequal income distributions. We go on to examine the effect on the same indices of simultaneously increasing one income and decreasing another higher up the distribution, deriving results which quantify the extent of the 'bucket leak' which can be tolerated without negating the beneficial inequality effect of the transfer. Our results have implications for the inequality impacts of different income growth patterns, and of redistributive programmes (leaky or not), which are briefly discussed.
Keywords: inequality index, inequality ordering, leaky bucket.<br>Classification-JEL: D63<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0315.pdf<br>File-Format: application/pdf<br>File-Size: 461<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/14<br>Title: Is there a retirement consumption puzzle in Italy?<br>Author-Name:  Raffaele Miniaci<br>Author-X-Name-First: Raffaele<br>Author-X-Name-Last:  Miniaci<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Chiara Monfardini<br>Author-X-Name-First: Chiara<br>Author-X-Name-Last:  Monfardini<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Guglielmo Weber<br>Author-X-Name-First: Guglielmo<br>Author-X-Name-Last:  Weber<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200307<br>Length: 43 pp<br>Number: W03/14<br>Abstract: In this paper we investigate the way consumption changes around retirement in Italy. Using micro data covering the 1985-96 period, we find that consumption age patterns are similar to those found in the US and other developed countries, despite the much more wide-spread cohabitation of different generations. We also document the existence of a one-off drop in consumption at retirement of the household head, as in the UK and the US, and find that consumption of work-related goods falls around retirement age and home production of food and other goods increases. Given that we can provide evidence that Italian households who retired over the sample period knew reasonably well what their pension income would be, the only reason why forward looking consumers should reduce spending around retirement is because of their increased consumption of leisure. We do find evidence that the abrupt falls in total non-durable consumption at retirement disappear when leisure is taken into account, in agreement with the predictions of the life-cycle theory. This finding is robust to the way consumption is attributed to different household members, and to exclusion of non-nuclear households from the analysis.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0314.pdf<br>File-Format: application/pdf<br>File-Size: 473<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/13<br>Title: Fiscal effects of reforming the UK state pension system<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200307<br>Length: 42 pp<br>Number: W03/13<br>Abstract: The fiscal and distributive impacts of three reforms to the social security pension system in the UK are evaluated. All three reforms are designed to increase the retirement age by changing the incentive structure underlying the pension system. The first increases the state pension age by three years. The second introduces an actuarial adjustment to retirement both before and after age sixty five allowing deferral to age 70. The final reform adapts the second reform to include a cap and a floor so as to mirror more closely the existing state pension scheme in the UK. Using a transition model of retirement, the simulations show that increasing the state pension age leads to a lower level of expenditure on the state pension, which is only partially offset through increased state spending on both means-tested income support and disability benefit (invalidity benefit). Employee national insurance receipts are also directly increased through the increase in the state pension age. The increase in retirement ages would also lead to an increase in government revenues arising from increased income tax and employee and employer national insurance contributions. As a result there would be lower levels of government borrowing (or larger government surpluses) than under the base system.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0313.pdf<br>File-Format: application/pdf<br>File-Size: 399<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/12<br>Title: Survival of the best fit: exposure to low-wage countries and the (uneven) growth of US manufacturing plants<br>Author-Name: Andrew Bernard<br>Author-X-Name-First: Andrew<br>Author-X-Name-Last: Bernard<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Dartmouth University<br>Author-Name:  J. Bradford Jensen<br>Author-X-Name-First: J.<br>Author-X-Name-Last:  Jensen<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Peter Schott<br>Author-X-Name-First: Peter<br>Author-X-Name-Last: Schott<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Creation-Date: 200306<br>Length: 38 pp<br>Number: W03/12<br>Abstract: This paper examines the role of international trade in the reallocation of U.S. manufacturing activity within and across industries from 1977 to 1997. It introduces a new measure of industry exposure to international trade, motivated by the Heckscher-Ohlin model, which focuses on where imports originate rather than their overall level. Results demonstrate that plant survival as well as output and employment growth are negatively associated with the share of industry imports sourced from the world's lowest-wage countries. Within industries, activity is reallocated towards capital-intensive plants. Plants are also more likely to alter their product mix (i.e. switch industries) in response to trade with low-wage countries. Plants altering their product mix switch to industries that are more capitaland skill-intensive.<br>Classification-JEL: F11, F14 , L25, L60<br>Keywords: Low-Wage Country Import Competition, Heckscher-Ohlin, Manufacturing Plant<br>File-URL:http://www.ifs.org.uk/wps/wp0312.pdf<br>File-Format: application/pdf<br>File-Size: 517<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/11<br>Title: Judicial accountability and economic policy outcomes: evidence from employment discrimination charges<br>Author-Name: Tim Besley<br>Author-X-Name-First: Tim<br>Author-X-Name-Last: Besley<br>Author-Email: t.besley@lse.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and London School of Economics<br>Author-Name:  Abigail Payne<br>Author-X-Name-First: Abigail<br>Author-X-Name-Last:  Payne<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200306<br>Length: 32 pp<br>Number: W03/11<br>Abstract: How and whether judges should be held accountable is a key issue in the design of a legal system. Thirty-seven of the forty-eight continental states use some method of judicial selection which involves a direct role for citizens in selecting or re-appointing the judiciary. We identify two theoretical reasons why the method used for choosing judges is important � (i) a selection effect if the competence or underlying preferences of judges is affected, (ii) an incentive effect if the judges who are chosen behave differently because of the method used for their reappointment. This paper uses data from the U.S. to investigate whether judicial selection methods affect the number of employment discrimination charges filed for the period 1973- 2000. Our results show that states that appoint their judges have lower levels of discrimination charges compared to those that use some form of election. The results appear to be driven by states where judges being subject to re-election incentives rather than because judges with different preferences/competences are being chosen.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0311.pdf<br>File-Format: application/pdf<br>File-Size: 300<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/10<br>Title: Falling Trade Costs, Heterogeneous Firms, and Industry Dynamics<br>Author-Name: Andrew Bernard<br>Author-X-Name-First: Andrew<br>Author-X-Name-Last: Bernard<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Dartmouth University<br>Author-Name:  J. Bradford Jensen<br>Author-X-Name-First: J.<br>Author-X-Name-Last:  Jensen<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Peter Schott<br>Author-X-Name-First: Peter<br>Author-X-Name-Last: Schott<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Creation-Date: 200306<br>Length: 33 pp<br>Number: W03/10<br>Abstract: This paper examines the response of industries and firms to changes in trade costs. Several new firm-level models of international trade with heterogeneous firms predict that industry productivity will rise as trade costs fall due to the reallocation of activity across plants within an industry. Using disaggregated U.S. import data, we create a new measure of trade costs over time and industries. As the models predict, productivity growth is faster in industries with falling trade costs. We also find evidence supporting the major hypotheses of the heterogenous- firm models. Plants in industries with falling trade costs are more likely to die or become exporters. Existing exporters increase their shipments abroad. The results do not apply equally across all sectors but are strongest for industries most likely to be producing horizontally-differentiated tradeable goods.<br>Classification-JEL: F10<br>Keywords: Plant deaths, survival, exit, exports, employment, tariffs, freight costs, transport<br>File-URL:http://www.ifs.org.uk/wps/wp0310.pdf<br>File-Format: application/pdf<br>File-Size: 462<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/09<br>Title: Pension fund governance and the choice between defined benefit and defined contribution plans<br>Author-Name: Tim Besley<br>Author-X-Name-First: Tim<br>Author-X-Name-Last: Besley<br>Author-Email: t.besley@lse.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and London School of Economics<br>Author-Name:  Andrea Prat<br>Author-X-Name-First: Andrea<br>Author-X-Name-Last:  Prat<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200306<br>Length: 31 pp<br>Number: W03/09<br>Abstract: <br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0309.pdf<br>File-Format: application/pdf<br>File-Size: 374<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/08<br>Title: Incentives, choice and accountability in the provision of public services<br>Author-Name: Tim Besley<br>Author-X-Name-First: Tim<br>Author-X-Name-Last: Besley<br>Author-Email: t.besley@lse.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and London School of Economics<br>Author-Name:  Maitreesh Ghatak<br>Author-X-Name-First: Maitreesh<br>Author-X-Name-Last:  Ghatak<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200305<br>Length: 30 pp<br>Number: W03/08<br>Abstract: This paper discusses a theoretical framework to study the issues of competition and incentives without relying on the standard profit-oriented �market� model in the context of the debates about public service reform in the UK. It uses the idea that the production of public services coheres around a mission, and discusses how decentralized service provision can raise productivity by matching motivated workers to their preferred missions. Our focus on competition and incentives cuts across traditional debates about public versus private ownership and allows for the possibility of involving private non-profits. We also address concerns about the consequences of allowing more flexibility in mission design and competition on inequality.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0308.pdf<br>File-Format: application/pdf<br>File-Size: 311<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/07<br>Title: Errors in survey reports of consumption expenditures<br>Author-Name: Erich Battistin<br>Author-X-Name-First: Erich<br>Author-X-Name-Last: Battistin<br>Author-Email: e.battistin@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200304<br>Length: 58 pp<br>Number: W03/07<br>Abstract: This paper considers data quality issues for the analysis of consumption inequality exploiting two complementary datasets from the Consumer Expenditure Survey for the United States. The Interview sample follows survey households over four calendar quarters and consists of retrospectively asked information about monthly expenditures on durable and non-durable goods. The Diary sample interviews household for two consecutive weeks and includes detailed information about frequently purchased items (food, personal cares and household supplies). Each survey has its own questionnaire and sample. Information from one sample is exploited as an instrument for the other sample to derive a correction for the measurement error affecting observed measures of consumption inequality. Implications of our ?ndings are used as a test for the permanent income hypothesis.<br>Classification-JEL: C13, C42, D12, D91<br>Keywords: Consumption Inequality; Measurement Error; Permanent Income Hypothesis<br>File-URL:http://www.ifs.org.uk/wps/wp0307.pdf<br>File-Format: application/pdf<br>File-Size: 562<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/06<br>Title: Explaining trends in household spending<br>Author-Name: Laura Blow<br>Author-X-Name-First: Laura<br>Author-X-Name-Last: Blow<br>Author-Email: l.blow@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200304<br>Length: <br>Number: W03/06<br>Abstract: In this paper we model the changing distribution of household spending in the UK over the period 1978 to 1999 and explore the interpretation of remaining time trends in spending once changes in other observed covariates have been accounted for.<br>Classification-JEL: D12<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0306.pdf<br>File-Format: application/pdf<br>File-Size: 566<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/05<br>Title: Ability, parental background and educational policy: empirical evidence from a social experiment<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name:  M&aring;rten Palme<br>Author-X-Name-First: M&aring;rten<br>Author-X-Name-Last:  Palme<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200304<br>Length: 28 pp<br>Number: W03/05<br>Abstract: Following the great expansion of secondary education in the United States between 1910 and 1940, Sweden was one of the first Western European countries to attempt such an expansion by increasing the years of compulsory schooling and and improving access to academic type education by abolishing early selection. The reform was preceded by a large-scale area based social experiment where 25% of the country's municipalities were assigned to the reform. We use this assignment, together with rich individual data to evaluate this major educational intervention. Our key findings are that this reform increased the educational attainment of individuals with unskilled fathers. In addition it caused significant and large increases in the earnings of those with unskilled fathers and above median ability.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0305.pdf<br>File-Format: application/pdf<br>File-Size: 310<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/04<br>Title: Measuring taxes on income from capital<br>Author-Name: Michael Devereux<br>Author-X-Name-First: Michael<br>Author-X-Name-Last: Devereux<br>Author-Email: michael.devereux@sbs.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Oxford<br>Creation-Date: 200303<br>Length: 49 pp<br>Number: W03/04<br>Abstract: This paper reviews how the impact of taxes on the incentive to invest in the corporate sector can be measured. The main focus of the paper is to discuss measures derived from economic theory. In empirical work, these tend to be based on the legal parameters of tax regimes, rather than on observed tax revenues or tax liabilities. A basic model is set up which yields two measures, reflecting two alternative forms of investment decision. An effective marginal tax rate is relevant for decisions concerning the scale of the capital stock. An effective average tax rate is relevant for discrete investment choices.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0304.pdf<br>File-Format: application/pdf<br>File-Size: 381<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/03<br>Title: Measuring taxes on income from capital: evidence from the UK<br>Author-Name: Michael Devereux<br>Author-X-Name-First: Michael<br>Author-X-Name-Last: Devereux<br>Author-Email: michael.devereux@sbs.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Oxford<br>Author-Name: Alexander Klemm<br>Author-X-Name-First: Alexander<br>Author-X-Name-Last: Klemm<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200303<br>Length: 42 pp<br>Number: W03/03<br>Abstract: This paper explores the properties of alternative measures of the taxation of income from capital, by applying them to data for the UK over the last thirty years. We consider several types of measures, reflecting both average and marginal rates.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0303.pdf<br>File-Format: application/pdf<br>File-Size: 342<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/02<br>Title: Ill health and retirement in Britain: a panel data based analysis<br>Author-Name: Richard Disney<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Disney<br>Author-Email: richard.disney@nottingham.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Nottingham<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Matthew Wakefield<br>Author-X-Name-First: Matthew<br>Author-X-Name-Last: Wakefield<br>Author-Email: m.wakefield@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Bologna<br>Creation-Date: 200302<br>Length: 28 pp<br>Number: W03/02<br>Abstract: We examine the role of ill-health in retirement decisions in Britain,  using the first eight waves of the British Household Panel Survey (1991-98). As  self-reported health status is likely to be endogenous to the retirement decision,  we instrument self-reported health by a constructed Ѩealth stock' measure using a  set of health indicator variables and personal characteristics, as suggested by  Bound et al (1999). Using both linear and non-linear fixed effects estimators, we  show that adverse individual health shocks are an important predictor of individual  retirement behaviour. We compare the impact of our constructed health measure on  economic activity with that arising from the use of other health variables in the  data set. We also examine the impact of the 1995 reform of disability benefits on  the retirement decision.<br>Classification-JEL: H55 I12 J26<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0302.pdf<br>File-Format: application/pdf<br>File-Size: 373<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:03/01<br>Title: Identifying anti-trust markets<br>Author-Name:  Paul Geroski<br>Author-X-Name-First: Paul<br>Author-X-Name-Last:  Geroski<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Creation-Date: 200301<br>Length: 17 pp<br>Number: W03/01<br>Abstract: <br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0301.pdf<br>File-Format: application/pdf<br>File-Size: 148<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/22<br>Title: Productivity convergence and foreign ownership at the establishment level<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Helen Simpson<br>Author-X-Name-First: Helen<br>Author-X-Name-Last: Simpson<br>Author-Email: helen.simpson@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and CMPO, Bristol<br>Author-Name: Stephen Redding<br>Author-X-Name-First: Stephen<br>Author-X-Name-Last: Redding<br>Author-Email: s.j.redding@lse.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200212<br>Length: 35<br>Number: W02/22<br>Abstract: This paper investigates whether there is convergence in Total Factor Productivity towards the technological frontier at the establishment level. We find convergence to the frontier is statistically and quatatively important, suggesting the existence of technology spillovers. Foreign multinationals make up a significant proportion of establishments at the technological frontier, and therefore make a contribution to productivity growth through technology transfer. We also find evidence that increased foreign presence within an industry raises the speed of convergence to the technological frontier.<br>Classification-JEL: F23, O33, O47<br>Keywords: Foreign Direct Investment (FDI), knowledge spillovers, competition<br>File-URL:http://www.ifs.org.uk/wps/wp0222.pdf<br>File-Format: application/pdf<br>File-Size: 345<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/21<br>Title: The distribution of financial wealth in the UK: evidence from 2000 BHPS data<br>Author-Name: James Banks<br>Author-X-Name-First: James<br>Author-X-Name-Last: Banks<br>Author-Email: j.banks@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Zo&euml; Oldfield<br>Author-X-Name-First: Zo&euml;<br>Author-X-Name-Last: Oldfield<br>Author-Email: z.oldfield@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Matthew Wakefield<br>Author-X-Name-First: Matthew<br>Author-X-Name-Last: Wakefield<br>Author-Email: m.wakefield@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Bologna<br>Creation-Date: 200211<br>Length: 48 pp<br>Number: W02/21<br>Abstract: This paper examines evidence from the British Household Panel Study on the distribution of financial  wealth amongst benefit units in 2000. It also provides some analysis of the links between financial wealth,  pensions and housing wealth. For part of the sample, the data also allow a comparison of holdings in some  elements of the financial portfolio in 2000, and in 1995.</p>This paper examines evidence from the British Household Panel Study on the distribution of financial  wealth amongst benefit units in 2000.</p><p>Updated version with revised housing wealth estimates (tables V.5-V.7, A9-A12 and figure IV.4 affected)<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0221.pdf<br>File-Format: application/pdf<br>File-Size: 494<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/20<br>Title: From wages to consumption inequality: tracking shocks<br>Author-Name: Orazio Attanasio<br>Author-X-Name-First: Orazio<br>Author-X-Name-Last: Attanasio<br>Author-Email: o.attanasio@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name:  Gabriella Berloffa<br>Author-X-Name-First: Gabriella<br>Author-X-Name-Last:  Berloffa<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Stephen Redding<br>Author-X-Name-First: Stephen<br>Author-X-Name-Last: Redding<br>Author-Email: s.j.redding@lse.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200211<br>Length: 15 pp<br>Number: W02/20<br>Abstract: Forthcoming<br>Keywords: <br>File-URL:<br>File-Format: application/pdf<br>File-Size: <p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/19<br>Title: Testing the RPI data for consistency with the theory of the cost-of-living index<br>Author-Name: Ian Crawford<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Crawford<br>Author-Email: Ian.Crawford@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Oxford<br>Author-Name:  Isabella Image<br>Author-X-Name-First: Isabella<br>Author-X-Name-Last:  Image<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200211<br>Length: 15 pp<br>Number: W02/19<br>Abstract: This paper tests the published section level price and weight dataused in the compilation of the UK Retail Prices Index for consistencywith the theory of the cost-of-living index. We use a nonparametric testof theoretical consistency and bootstrap statistical methods to estimatethe probability of consistency.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0219.pdf<br>File-Format: application/pdf<br>File-Size: 359<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/18<br>Title: Aggregate worker reallocation and occupational mobility in the United States: 1971-2000<br>Author-Name:  Giuseppe Moscarini<br>Author-X-Name-First: Giuseppe<br>Author-X-Name-Last:  Moscarini<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Francis Vella<br>Author-X-Name-First: Francis<br>Author-X-Name-Last:  Vella<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200210<br>Length: 39 pp<br>Number: W02/18<br>Abstract: We investigate the evolution and the sources of aggregate employment reallocation in the United States in the 1971-2000 March files of the Current Population Survey. We focus on the annual flows of male workers across occupations at the Census 3-digit level, the finest disaggregation at which a moving worker changes career and relocates to an observationally different technology. We find that the total reallocation of employment across occupations has been strongly procyclical and sharply declining until the early 1990s, before remaining relatively constant in the last decade. To reveal the sources of these patterns, while correcting for possible worker selection into employment, we construct a synthetic panel based on birth cohorts, and estimate various models of worker occupational mobility. We obtain five main results. The cross-occupation dispersion in labor demand, as measured by an index of net employment reallocation, has a strong association with total worker mobility. The demographic composition of employment, more specifically the increasing average age and college attainment level, explains some of the vanishing size and procyclicality of worker flows. High unemployment weakens the effects of individual worker characteristics on their occupational mobility. Worker mobility has significant residual persistence over time, as predicted by job-matching theory. Finally, we detect important unobserved cohort-specific effects; in particular, later cohorts have increasingly low unexplained occupational mobility, which contributes considerably to the downward trend in total employment reallocation over the last three decades.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0218.pdf<br>File-Format: application/pdf<br>File-Size: 1037<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/17<br>Title: Estimation of household demand systems with theoretically compatible Engel curves and unit value specifications<br>Author-Name: Ian Crawford<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Crawford<br>Author-Email: Ian.Crawford@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Oxford<br>Author-Name: Fran&ccedil;ois Laisney<br>Author-X-Name-First: Fran&ccedil;ois<br>Author-X-Name-Last: Laisney<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and ZEW, Mannheim<br>Author-Name: Ian Preston<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Preston<br>Author-Email: i.preston@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200210<br>Length: 35 pp<br>Number: W02/17<br>Abstract: We develop a method for estimation of price reactions using unit value data which exploits the implicit links between quantity and unit value choices. This allows us to combine appealing Engel curve specifications with a model of unit value determination in a way which is consistent with demand theory, unlike methods hitherto prominent in the literature. The method is applied to Czech data.<br>Classification-JEL: D11, D12<br>Keywords: Consumer demand, unit values<br>File-URL:http://www.ifs.org.uk/wps/wp0217.pdf<br>File-Format: application/pdf<br>File-Size: 358<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/16<br>Title: Partial insurance, information and consumption dynamics<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name:  Luigi Pistaferri<br>Author-X-Name-First: Luigi<br>Author-X-Name-Last:  Pistaferri<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Ian Preston<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Preston<br>Author-Email: i.preston@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200208<br>Length: <br>Number: W02/16<br>Abstract: This paper uses panel data on household consumption and income to evaluate the degree of insurance to income shocks. Our aim is to describe the transmission of income inequality into consumption inequality. Our framework nests the special cases of self-insurance and the complete markets assumption. We assess the degree of insurance over and above self-insurance through savings by contrasting shifts in the cross-sectional distribution of income growth with shifts in the cross-sectional distribution of consumption growth, and analyzing the way these two measures of household welfare correlate over time. We combine panel data on income from the PSID with consumption data from repeated CEX cross-sections in a structural way, i.e. using conventional demand analysis rather than reduced form imputation procedures. Our results point to some partial insurance but reject the complete markets restriction. We find a greater degree of insurance for transitory shocks and differences in the degree of insurance over time and across education. We also document the importance of durables and of taxes and transfers as a means of insurance.<br>Classification-JEL: D52, D91, I30<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0216.pdf<br>File-Format: application/pdf<br>File-Size: 421<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/15<br>Title: Deadweight loss and taxation of earned income: evidence from tax records of the UK self-employed<br>Author-Name: Laura Blow<br>Author-X-Name-First: Laura<br>Author-X-Name-Last: Blow<br>Author-Email: l.blow@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Ian Preston<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Preston<br>Author-Email: i.preston@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Creation-Date: 200207<br>Length: 28 pp<br>Number: W02/15<br>Abstract: &lt;p&gt;Responses to changes in marginal income tax rates can be more complex than a simple adjustment in hours worked. Given this, a more inclusive way to assess the deadweight costs of taxes on labour income is to examine the effect of changes in the marginal tax rate on taxable income rather than on labour supply. In this paper we apply a grouping estimator to data from the UK Survey of Personal Incomes so assess the magnitude of taxable income responses of the self employed. Our results point to a modest degree of deadweight loss.&lt;/p&gt;<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0215.pdf<br>File-Format: application/pdf<br>File-Size: 457<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/14<br>Title: The impact on incentives of five years of social security reform in the UK<br>Author-Name: Mike Brewer<br>Author-X-Name-First: Mike<br>Author-X-Name-Last: Brewer<br>Author-Email: m.brewer@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and ISER, Essex University<br>Author-Name: Tom Clark<br>Author-X-Name-First: Tom<br>Author-X-Name-Last: Clark<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200207<br>Length: 52 pp<br>Number: W02/14<br>Abstract: The UK's Labour Government has expanded means-testing of  social security but attempted to do so while minimising the  disincentive effects typically associated with such an approach. We  test whether it has succeeded by reviewing the effect of 5 years of  reforms on a range of incentives across the British population, undertaking micro-simulations on survey data. The incentive to enter  work increases for the first earner in families, but for second- earners in couples the incentive to work has generally been dulled.  Effective marginal tax rates have generally increased for workers, in spite of reductions in benefit withdrawal rates, owing to the  increasing numbers facing means-tested benefit withdrawal. Reforms  have reduced the number of pensioners facing very high effective  marginal rates, but increased the number on moderately high rates.  Incentives regarding family life have been affected: partnering has  become less financially attractive for low-income individuals; having  children has become more financially attractive.<br>Classification-JEL: H24, H31<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0214.pdf<br>File-Format: application/pdf<br>File-Size: 666<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/13<br>Title: Political institutions and policy choices: evidence from the United States<br>Author-Name: Tim Besley<br>Author-X-Name-First: Tim<br>Author-X-Name-Last: Besley<br>Author-Email: t.besley@lse.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and London School of Economics<br>Creation-Date: 200207<br>Length: 114 pp<br>Number: W02/13<br>Abstract: A rich array of institutional diversity makes the United  States an excellent place to study the relationship between political  institutions and public policy outcomes. This essay has three main aims. First, it reviews existing empirical evidence on the  relationship between institutional rules, political representation and  policy outcomes. It aims to place the literature into a broader  context of theoretical and empirical work in the field of political  economy. Second, it develops a parallel empirical analysis that  updates studies in the literature and re-examines some of the claims  made, in a setting unified both in terms of policy outcomes and the  period under study. Third, the paper develops some new directions for  research, presenting a small number of novel exploratory results.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0213.pdf<br>File-Format: application/pdf<br>File-Size: 1874<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/12<br>Title: Five years of social security reforms in the UK<br>Author-Name: Mike Brewer<br>Author-X-Name-First: Mike<br>Author-X-Name-Last: Brewer<br>Author-Email: m.brewer@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and ISER, Essex University<br>Author-Name: Tom Clark<br>Author-X-Name-First: Tom<br>Author-X-Name-Last: Clark<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Matthew Wakefield<br>Author-X-Name-First: Matthew<br>Author-X-Name-Last: Wakefield<br>Author-Email: m.wakefield@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Bologna<br>Creation-Date: 200206<br>Length: 53 pp<br>Number: W02/12<br>Abstract: The current Labour Government was elected in 1997 with few  specific social security proposals. This paper argues that after five  years, consistent trends in social security policy have emerged: there  is a willingness to increase benefits; a �work-first� focus;  increasing centrality for benefits that relate to �need�, which has  involved expanded means-testing; a downgrading of contributory  benefits; and, a desire to reduce poverty by redistributing to  particular demographic groups. Many of these characteristics of Labour  policy, such as the size of caseloads or aggregate expenditure, are  yet to show up in various aggregate data, and we argue that this is  probably due to various counter-balancing socio-economic changes since  1997. Looking forward, we discuss what the introduction of new forms  of means-test might achieve. We also suggest that it might be  considered odd that Labour has left Housing Benefit and Council Tax  Benefit unreformed, especially since a good chance to reform them  without significant cost or low-income losers, has been missed.<br>Classification-JEL: D31, I30, H24, H53, H55<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0212.pdf<br>File-Format: application/pdf<br>File-Size: 410<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/11<br>Title: Factor price equalisation in the UK<br>Author-Name: Andrew Bernard<br>Author-X-Name-First: Andrew<br>Author-X-Name-Last: Bernard<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Dartmouth University<br>Author-Name: Stephen Redding<br>Author-X-Name-First: Stephen<br>Author-X-Name-Last: Redding<br>Author-Email: s.j.redding@lse.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Peter Schott<br>Author-X-Name-First: Peter<br>Author-X-Name-Last: Schott<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name: Helen Simpson<br>Author-X-Name-First: Helen<br>Author-X-Name-Last: Simpson<br>Author-Email: helen.simpson@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and CMPO, Bristol<br>Creation-Date: 200206<br>Length: 65 pp<br>Number: W02/11<br>Abstract: This paper develops a general test of factor price  equalization that is robust to unobserved regional productivity  differences, unobserved region-industry factor quality differences and  variation in production technology across industries. We test relative  factor price equalization across regions of the UK. Although the UK is small and densely-populated, we find evidence of statistically  significant and economically important departures from relative factor  price equalization. Our estimates suggest three distinct relative  factor price areas with a clear spatial structure. We explore  explanations for these findings, including multiple cones of diversification, region-industry technology differences, agglomeration  and increasing returns to scale.<br>Classification-JEL: F11, F14, C14<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0211.pdf<br>File-Format: application/pdf<br>File-Size: 644<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/10<br>Title: Biases in the reporting of labour market dynamics<br>Author-Name: Gillian Paull<br>Author-X-Name-First: Gillian<br>Author-X-Name-Last: Paull<br>Author-Email: gill_p@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200206<br>Length: 65 pp<br>Number: W02/10<br>Abstract: Correctly measuring individual dynamics in labour market  behaviour has become increasingly important as research and policy  attention has become more focused on the relationships between current  employment opportunities and past experience. Surveys collecting  information on labour market histories use repeated interviews and  retrospective reporting, laying the resulting data open to potential biases from spurious transitions due to random measurement errors and  from systematic recall error. This paper uses a unique data  opportunity provided by the British Household Panel Survey to  systematically investigate the impact of recall on measured labour  market behaviour and to highlight how and to what degree the biases in  the reported data may affect the estimation of models of labour market  dynamics. The results allow analysts to judge whether conclusions  drawn from such models are likely to be compromised by the reporting  biases.<br>Classification-JEL: J60, J64, C8<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0210.pdf<br>File-Format: application/pdf<br>File-Size: 507<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/09<br>Title: Choice of pension scheme and job mobility in Britain<br>Author-Name: Richard Disney<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Disney<br>Author-Email: richard.disney@nottingham.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Nottingham<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200205<br>Length: 42 pages<br>Number: W02/09<br>Abstract: This paper examines the choice of pension scheme and job mobility in Britain.
Workers in Britain can choose to belong wholly to the social security (public
pension) programme, or to a company-provided plan (occupational pension), or to
purchase their own individual pension. We use household panel data for the 1990s to
show that individuals that subsequently move job select pension arrangements that a
priori impose lower costs on job mobility. A feature of the British policy
�experiment�, and of the data, is that we can differentiate between choice of actual
pension arrangement by the individual and what pension arrangements were offered
to that individual. This permits us to test indirectly whether the observed relationship
arises from employer selection or from pension scheme design.<br>Classification-JEL: H55 J32 J63<br>Keywords: Pensions, job tenure, labour mobility<br>File-URL:http://www.ifs.org.uk/wps/wp0209.pdf<br>File-Format: application/pdf<br>File-Size: 375<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/08<br>Title: Collective labour supply with children<br>Author-Name:  Pierre-Andr&eacute; Chiappori<br>Author-X-Name-First: Pierre-Andr&eacute;<br>Author-X-Name-Last:  Chiappori<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Creation-Date: 200205<br>Length: 25 pp<br>Number: W02/08<br>Abstract: We extend the collective model of household behavior to   allow for the existence of public consumption. Under a separability  assumption, we show that the observation of the labor supplies and  the household demand for the public good allow to identify  preferences and the decision process up to some additive constant.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0208.pdf<br>File-Format: application/pdf<br>File-Size: 396<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/06<br>Title: Estimating Euler equations<br>Author-Name: Orazio Attanasio<br>Author-X-Name-First: Orazio<br>Author-X-Name-Last: Attanasio<br>Author-Email: o.attanasio@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Hamish Low<br>Author-X-Name-First: Hamish<br>Author-X-Name-Last: Low<br>Author-Email: Hamish.Low@econ.cam.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Trinity College, Cambridge<br>Creation-Date: 200203<br>Length: 82 pp<br>Number: W02/06<br>Abstract: In this paper we consider conditions under which the  estimation of a log-linearized Euler equation for consumption yields  consistent estimates of preference parameters. When utility is  isoelastic and a sample covering a long time period is available,  consistent estimates are obtained from the log-linearized Euler equation when the innovations to the conditional variance of  consumption growth are uncorrelated with the instruments typically  used in estimation. We perform a Montecarlo experiment, consisting  in solving and simulating a simple life cycle model under  uncertainty, and show that in most situations, the estimates  obtained from the log-linearized equation are not systematically  biased. This is true even when we introduce heteroscedasticity in  the process generating income. The only exception is when discount  rates are very high (e.g. 47% per year). This problem arises because  consumers are nearly always close to the maximum borrowing limit:  the estimation bias is unrelated to the linearization and estimates  using nonlinear GMM are as bad. Across all our situations,  estimation using a log-linearized Euler equation does better than  nonlinear GMM despite the absence of measurement error. Finally, we  plot life cycle profiles for the variance of consumption growth,  which, except when the discount factor is very high, is remarkably  flat. This implies that claims that demographic variables in log- linearized Euler equations capture changes in the variance of  consumption growth are unwarranted.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0206.pdf<br>File-Format: application/pdf<br>File-Size: 335<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/05<br>Title: The returns to education: a review of the empirical macro-economic literature<br>Author-Name: Barbara Sianesi<br>Author-X-Name-First: Barbara<br>Author-X-Name-Last: Sianesi<br>Author-Email: b.sianesi@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200203<br>Length: 82 pp<br>Number: W02/05<br>Abstract: The idea of positive educational externalities is that the  benefits of individually acquired education may not be restricted to the individual but might spill over to others as well, accruing   at higher aggregation levels, in particular at the macro-economic   one. We offer an extensive summary and a critical discussion of the  empirical literature on the impact of human capital on macro- economic performance, with a particular focus on UK policy. Key  findings include: (1) Taking the studies as a whole, there is  compelling evidence that human capital increases productivity.  Although there is an important theoretical distinction between the  augmented neo-classical approach and the new growth theories, the  empirical literature is still largely divided on whether the stock  of education affects the long-run level or growth rate of the  economy. A one-year increase in average education is found to raise  the level of output per capita by between 3 and 6 percent according  to augmented neo-classical specifications, while it would lead to an  over 1 percentage point faster growth according to estimates from  the new-growth theories. (2) Over the short-run planning horizon (4  years) the empirical estimates of the change in GDP for a given  increase in the human capital stock are of similar orders of  magnitude in the two approaches. (3) The impact of increases at  different levels of edu-cation appear to depend on the level of a  country's development, with tertiary/higher education being the most  important for growth in OECD countries. (4) Education is found to  yield additional indirect benefits to growth (in par-ticular, by  stimulating physical capital investments and technological  development and adoption). More preliminary evidence seems to  indicate that type, quality and efficiency of education all matter  for growth. The most pressing methodological problems are the  measurement of human capital; systematic differences in the  coefficient of education across countries (in particular between  developing and developed countries) and reverse causality. We also  make recommendations for future research priorities.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0205.pdf<br>File-Format: application/pdf<br>File-Size: 580<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/04<br>Title: Competition and innovation: an inverted U relationship<br>Author-Name: Philippe Aghion<br>Author-X-Name-First: Philippe<br>Author-X-Name-Last: Aghion<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Harvard University<br>Author-Name:  Nicholas Bloom<br>Author-X-Name-First: Nicholas<br>Author-X-Name-Last:  Bloom<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Peter Howitt<br>Author-X-Name-First: Peter<br>Author-X-Name-Last: Howitt<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and Brown University<br>Creation-Date: 200202<br>Length: 70 pp<br>Number: W02/04<br>Abstract: This paper investigates the relationship between product market competition (PMC) and innovation. A Schumpeterian growth model is developed in which firms innovate ѳtep-by-stepҬ and where both technological leaders and their followers engage in R&D activities. In this model, competition may increase the incremental profit from innovating; on the other hand, competition may also reduce innovation incentives for laggards. This model generates four main predictions which we test empirically. First, the relationship between product market competition (PMC) and innovation is an inverted U-shape: the escape competition effect dominates for low initial levels of competition, whereas the Schumpeterian effect dominates at higher levels of competition. Second, the equilibrium degree of technological Ѯeck-and-neckness' among firms should decrease with PMC. Third, the higher the average degree of Ѯeck-and-neckness' in an industry, the steeper the inverted-U relationship between PMC and innovation in that industry. Fourth, firms may innovate more if subject to higher debt-pressure, especially at lower levels of PMC. We confront these four predictions with a new panel data set on UK firms' patenting activity at the US patenting office. The inverted U relationship, the neck and neck, and the debt pressure predictions are found to accord well with observed behavior in the data.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0204.pdf<br>File-Format: application/pdf<br>File-Size: 1485<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/03<br>Title: Swedish active labour market programmes in the 1990s: overall  effectiveness and differential performance<br>Author-Name: Barbara Sianesi<br>Author-X-Name-First: Barbara<br>Author-X-Name-Last: Sianesi<br>Author-Email: b.sianesi@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200202<br>Length: 48 pp<br>Number: W02/03<br>Abstract: The ѓwedish model' of active labour market programmes is  investigated in relation to some crucial institutional features with  two aims: examining how successful it has been in the context of the  high unemployment atypically experienced by Sweden in the 1990s and trying to derive some general lessons as to which type of  programme works best. The effectiveness of the programmes in  improving the labour market prospects of unemployed participants is  assessed in terms of their impact on individual employment  probability and collection of unemployment benefits over time. The  evidence as to the overall effectiveness of the programmes is rather  mixed, with individuals joining a programme subsequently enjoying  higher employment rates but also a higher probability of drawing  unemployment benefits over time than if they had searched longer in  open unemployment. The renewed eligibility to unemployment  compensation following participation in a programme appears to be a  most critical driving force behind these results. In fact, when comparing the programme effects for individuals entitled to  unemployment benefits to the programme effects for non-entitled  individuals, the positive effect on participants' employment  prospects disappears, being instead replaced by a much higher  probability of benefit collection. Still, the various programmes may  have differential effects, making it interesting to quantify the  relative performance of the six main types of Swedish programmes   that were available to adult unemployed workers en
Titled to  unemployment benefits in the 1990s: labour market training,  workplace introduction, work experience placement, relief work,  trainee replacement and employment subsidies. The best performer is  by far employment subsidies, followed by trainee replacement. The  main finding that those programmes most similar to regular  employment rank unambiguously highest has however to be appraised in   the light of the macroeconomic literature, which has documented  large and negative displacement and dead-weight effects exactly for  these types of programme.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0203.pdf<br>File-Format: application/pdf<br>File-Size: 245<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/02<br>Title: Understanding the relative generosity of government financial support for families with children<br>Author-Name: James Banks<br>Author-X-Name-First: James<br>Author-X-Name-Last: Banks<br>Author-Email: j.banks@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Mike Brewer<br>Author-X-Name-First: Mike<br>Author-X-Name-Last: Brewer<br>Author-Email: m.brewer@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and ISER, Essex University<br>Creation-Date: 200201<br>Length: 48 pp<br>Number: W02/02<br>Abstract: The principal of horizontal equity can be interpreted as   requiring that households with the same pre-transfer incomes and the  same consumption needs should receive the same post-transfer  incomes. We argue the generosity of government financial support to  families with children should be analysed with respect to such a  baseline. Although not without problems, equivalence scales form an  important part of such a procedure. The comparison of financial  support to families with children with a corresponding equivalence  scale, both over time and between countries, should give a more  accurate picture of generosity than comparisons of cash values  alone. We discuss potential advantages and drawbacks of such  comparisons, illustrating with comparisons of the US and UK systems.  The main drawback is that we can only evaluate the generosity of  support for children relative to that for adults. With this  restriction, horizontal equity is more likely to be achieved for  couples with 1 child than for those with 2 children. For some  groups, the US is more generous to children (relative to adults)   than the UK, but this difference is partly generated by the US  system being less generous to childless households than the UK.<br>Classification-JEL: H23, H31, J13<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0202.pdf<br>File-Format: application/pdf<br>File-Size: 551<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:02/01<br>Title: An evaluation of the Swedish system of active labour market  programmes in the 1990s<br>Author-Name: Barbara Sianesi<br>Author-X-Name-First: Barbara<br>Author-X-Name-Last: Sianesi<br>Author-Email: b.sianesi@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200201<br>Length: 47 pp<br>Number: W02/01<br>Abstract: The low unemployment rates traditionally enjoyed by Sweden have often been attributed to the country's extensive system of  active labour market programmes, which have thus frequently been  regarded as a model for other countries to emulate. However,  unemployment grew enormously in Sweden when the country was hit by a  most severe recession in the early 1990s. This paper investigates  how effective the Swedish labour market programmes have been in  improving the opportunities of unemployed individuals over the last  decade. The analyses look at the performance of the Swedish system  in its entirety, combining all the programmes into one and focusing  in particular on the interactions between the unemployment benefit  system and the programme system. In fact, a labour market programme  in Sweden effectively comes as a bundle of two conflicting  components: it is intended to equip job-seekers with marketable  skills which should improve their opportunities on the labour  market, but at the same time it allows to renew eligibility to  generous unemployment compensation, thus reinforcing the work  disincentive associated with the unemployment insurance system.  Using extensive information on the labour market history of more  than 110,000 individuals followed for five years, the presence of  short- and long-term programme effects is investigated in terms of a  number of outcomes, including employment and unemployment benefit  collection. More specifically, the analyses relate to how unemployed  individuals joining a programme per-form, on average, compared to a  hypothetical state where they would have waited longer job-searching  in open unemployment. Overall, the impact of the programme system is  found to have been mixed. Unemployed individuals who go sooner on a  programme (compared to later or never), though remaining initially  locked-in in the unemployment system for around six months,  subsequently enjoy a higher probability of being in employment for  up to at least five years. By contrast, the fact that programme  participation en
Titles individuals to renewed unemployment  compensation creates strong incentives to remain within the official  unemployment system. Individuals who have joined a programme are  thus found to be more likely to return to benefit-compensated un- employment, to re-enter more programmes in the future, or to  alternate between benefits and program participation over time than  if they had searched longer as openly unemployed. The positive  effect on employment does in fact arise because the programmes  considerably reduce the chances of being unemployed outside the  official unemployment system.<br>Keywords: Active labour market programmes, evaluation<br>File-URL:http://www.ifs.org.uk/wps/wp0201.pdf<br>File-Format: application/pdf<br>File-Size: 405<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/25<br>Title: Differential effects of Swedish active labour market programmes for unemployed adults during the 1990s<br>Author-Name: Barbara Sianesi<br>Author-X-Name-First: Barbara<br>Author-X-Name-Last: Sianesi<br>Author-Email: b.sianesi@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200112<br>Length: 51 pp<br>Number: W01/25<br>Abstract: The paper evaluates the differential performance of the six   main types of Swedish programmes that were available to adult  unemployed workers en
Titled to unemployment benefits in the 1990s:  labour market training, workplace introduction, work experience  placement, relief work, trainee replacement and employment  subsidies. On the basis of a large and particularly rich  administrative dataset, propensity score multiple-treatment matching  methods are applied to investigate the differential performance of  the programmes both relative to one another and vis-&aacute;-vis more  intense job search in open unemployment. Outcomes being assessed are  short- and long-term employment rates as well as the probability of  collecting unemployment benefits over time. Compared to waiting  longer in open unemployment, all the programmes initially reduce  their participants' employment probability in the short term (lock- in effect). Positive findings on more long term employment prospects  are confined to job subsidies alone. Participation in trainee  replacement makes no difference to deputies' subsequent labour  market outcomes. Individuals joining any of the remaining programmes  later display either the same (workplace introduction) or lower  employment rates coupled with a higher benefit collection  probability than if they had searched further as openly unemployed.  A likely factor behind these disappointing results is the use of  such types of programmes simply as a way to requalify for  unemployment benefits. As to the pair-wise comparison of the six  programmes, the central finding is again that the more similar a  programme is to a regular job, the higher the programme's benefits  to its participants, with employment subsidies by far the best  performer, followed by trainee replacement. Several macroeconomic  studies have however documented large and negative displacement and  dead-weight effects for exactly these types of pro-gramme, which  highlights the difficult trade-off faced by labour market policy.<br>Classification-JEL: C14, J38, J65, J68<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0125.pdf<br>File-Format: application/pdf<br>File-Size: 641<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/24<br>Title: Aggregating labour supply and feedback effects in microsimulation<br>Author-Name:  John Creedy<br>Author-X-Name-First: John<br>Author-X-Name-Last:  Creedy<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Alan Duncan<br>Author-X-Name-First: Alan<br>Author-X-Name-Last: Duncan<br>Author-Email: a.duncan@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and NATSEM, University of Canberra<br>Creation-Date: 200111<br>Length: 27 pp<br>Number: W01/24<br>Abstract: This paper extends behavioural microsimulation modelling so that third round effects
of a policy change can be simulated. The first round effects relate to fixed hours
of work, while second round effects allow for changes in desired hours of work at
unchanged wages. These allow for endogenous changes to the distribution of wage
rates resulting from the labour supply responses to tax changes. This is achieved
using the concept of an aggregate ѳupply response scheduleҬ which identifies the
extent to which average labour supply responds to a proportional change in wage
rates. The third round effect is obtained after re-running a microsimulation model
with a suitable modification to individuals' wage rates. The method is illustrated
using the MITTS behavioural microsimulation model.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0124.pdf<br>File-Format: application/pdf<br>File-Size: 466<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/23<br>Title: Mothers' employment and the use of childcare in the UK<br>Author-Name: Alan Duncan<br>Author-X-Name-First: Alan<br>Author-X-Name-Last: Duncan<br>Author-Email: a.duncan@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and NATSEM, University of Canberra<br>Author-Name: Gillian Paull<br>Author-X-Name-First: Gillian<br>Author-X-Name-Last: Paull<br>Author-Email: gill_p@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Jayne Taylor<br>Author-X-Name-First: Jayne<br>Author-X-Name-Last: Taylor<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200110<br>Length: 48 pp<br>Number: W01/23<br>Abstract: <br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0123.pdf<br>File-Format: application/pdf<br>File-Size: 506<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/22<br>Title: Noisy share prices and the Q model of investment<br>Author-Name: Steve Bond<br>Author-X-Name-First: Steve<br>Author-X-Name-Last: Bond<br>Author-Email: steve.bond@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Nuffield College, Oxford<br>Author-Name:  Jason Cummins<br>Author-X-Name-First: Jason<br>Author-X-Name-Last:  Cummins<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200109<br>Length: 38 pp<br>Number: W01/22<br>Abstract: We consider to what extent the empirical failings of the Q   model of 
investment can be attributed to the use of share prices to  measure average q. We 
show that the usual empirical formulation may  fail to identify the Q model when 
stock market valuations deviate  from the present value of expected net 
distributions in ways that  are consistent with weak and semi-strong forms of the 
Efficient  Markets Hypothesis. We show that the structural parameters of the Q  
model can stil be identified in this case using a direct estimate of  the firm's 
fundamental value, and implement this using data on  securities analysts' 
earnings forecasts for a large sample of  publicly traded US firms. Our empirical 
results suggest that stock  market valuations deviate significantly from 
fundamental values.  Controlling for this, we find no evidence that the Q model 
of  investment is seriously misspecified.<br>Classification-JEL: D92, E22<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0122.pdf<br>File-Format: application/pdf<br>File-Size: 279<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/21<br>Title: Pension wealth and household saving: evidence from pension reforms in the UK<br>Author-Name: Orazio Attanasio<br>Author-X-Name-First: Orazio<br>Author-X-Name-Last: Attanasio<br>Author-Email: o.attanasio@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name:  Susanne Rohwedder<br>Author-X-Name-First: Susanne<br>Author-X-Name-Last:  Rohwedder<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200109<br>Length: 34 pp<br>Number: W01/21<br>Abstract: Using three major UK pension reforms as natural experiments    we 
investigate the relationship between pension saving and  discretionary private 
savings. Unlike most differences-in -differences  approaches which rely on 
average differences between the control and  the treatment group, we use economic 
theory to model the response of  each individual household. The model permits us 
to use both time- series and cross-sectional variation in a consistent way to 
identify  the behavioural response. The study is based on data from the Family  
Expenditure Survey. A measure of pension wealth is not observed, but we estimate 
it by applying the rules of the pension system to observed individual 
characteristics. The changes in pension wealth as a result of the reforms are 
substantial. The empirical analysis suggests that the earnings -related tier of 
the pension scheme has a negative impact on private  savings with substitution 
elasticities approaching �1.0. The impact  of the flat-rate tier of the scheme is 
found not to be significantly  different from zero.<br>Classification-JEL: H55<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0121.pdf<br>File-Format: application/pdf<br>File-Size: 377<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/20<br>Title: Evaluating the employment impact of a mandatory job search assistance program<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Monica Costa Dias<br>Author-X-Name-First: Monica<br>Author-X-Name-Last: Costa Dias<br>Author-Email: monica_d(at)ifs.org.uk@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Institute for Fiscal Studies<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name:  John Van Reenen<br>Author-X-Name-First: John<br>Author-X-Name-Last:  Reenen<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200108<br>Length: 57 pp<br>Number: W01/20<br>Abstract: This paper is an evaluation of the British labor market   program the "New Deal for the Young Unemployed" using administrative  panel data on individuals between 1982 and 1999. This mandatory  program involves extensive job assistance followed by various other  options, including wage subsidies. We exploit the differential  timing of the introduction of the program across regions as well as  age-related eligibility rules to identify the program effect.  Estimates of the employment effects of the mandatory job search  assistance part of the program are presented using a variety of  estimation techniques exploring combined "difference in  differences" and matching procedures. Our key finding is that  unemployed men are now 20% more likely to gain jobs than prior to  the New Deal.<br>Classification-JEL: J18, J23, J38<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0120.pdf<br>File-Format: application/pdf<br>File-Size: 329<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/18<br>Title: The role of employment experience in explaining the gender wage gap<br>Author-Name: Michal Myck<br>Author-X-Name-First: Michal<br>Author-X-Name-Last: Myck<br>Author-Email: see DIW-Berlin website: <a href="http://www.diw.de">www.diw.de</a>@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and DIW-Berlin<br>Author-Name: Gillian Paull<br>Author-X-Name-First: Gillian<br>Author-X-Name-Last: Paull<br>Author-Email: gill_p@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200108<br>Length: 57 pp<br>Number: W01/18<br>Abstract: Over the last two decades, the wage gap between men and   women has 
narrowed, yet a sizeable discrepancy in earnings capacity  remains between 
seemingly identical male and female workers.  Analyses of the role of employment 
experience in explaining this  gender wage gap have been limited by the rarity of 
appropriate data  sources containing this information. In this paper, data from a 
 series of twenty cross sections of the British Family Expenditure  Survey is 
used to examine the changing impact of employment  experience on the wage 
differential across four cohorts of male and  female workers. By using grouped 
data formed into a pseudo panel and  by estimating the wage regressions in first 
differences rather than  levels, the potential for estimation bias arising from 
unobserved  heterogeneity and the endogeneity of experience is reduced. The  
results show that accounting for differences in experience levels,  either as a 
simple total of all years of employment or broken down  into full-time and 
part-time employment, explains little of the  gender wage gap. Indeed, it is 
differences in the returns to  experience which generate the gender wage 
differential, for the gap only develops and widens as experience increases. 
Successive  generations of female workers have are found to have faired  
considerably better than previous cohorts in terms of their wage   position 
relative to men. However, this development is not explained  by relative changes 
in education level or experience between men and women.<br>Classification-JEL: J16, J41, C23<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0118.pdf<br>File-Format: application/pdf<br>File-Size: 329<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/17<br>Title: Issues arising in tax and benefit modelling: the case of family credit<br>Author-Name: Tom Clark<br>Author-X-Name-First: Tom<br>Author-X-Name-Last: Clark<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Julian McCrae<br>Author-X-Name-First: Julian<br>Author-X-Name-Last: McCrae<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200106<br>Length: <br>Number: W01/17<br>Abstract: <br>Classification-JEL: C81<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0117.pdf<br>File-Format: application/pdf<br>File-Size: 522<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/16<br>Title: Differential mortality in the UK<br>Author-Name: Orazio Attanasio<br>Author-X-Name-First: Orazio<br>Author-X-Name-Last: Attanasio<br>Author-Email: o.attanasio@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Carl Emmerson<br>Author-X-Name-First: Carl<br>Author-X-Name-Last: Emmerson<br>Author-Email: c.emmerson@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200106<br>Length: 34 pp<br>Number: W01/16<br>Abstract: In this paper we use the two waves of the British   Retirement Survey 
(1988/89 and 1994) to quantify the relationship  between socio-economic status 
and health outcomes. We find that,  even after conditioning on the initial health 
status, wealth  rankings are important determinants of mortality and the 
evolution  of the health indicator in the survey. For men aged 65 moving from the 
40th percentile to the 60th percentile in the wealth distribution increases the 
probability of survival by between 2.4 and 3.4 percentage points depending on the 
measure of wealth used. A slightly smaller effect is found for women of between 
1.5 and 1.9 percentage points. In the process of estimating these effects we 
control for non-random attrition from our sample.
British welfare reform debate in recent years. This  debate is informed by 
tax-benefit modelling, yet accurate modelling  of Family Credit is fraught with 
potential problems. The main model  input data are found to under-sample Family 
Credit recipients  considerably, but those who it does sample seem representative 
of  the Family Credit recipient population. Substantial mismatch is  found 
between those reporting Family Credit receipt and those  modelled as en
Titled. We show that regression techniques can be used  to adjust model results 
for the fact of non take-up, but that data  constraints leave no obvious way to 
deal with the equally  significant problem of famlies who receive benefit but are 
not  modelled as en titled. The difficulties posed by the input data's  under-sampling and by the significant number of claimants without  modelled en
Titlement lead us finally to consider the use (and the  limitations) of 
calibrating results.<br>Classification-JEL: J1, H8, I1<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0116.pdf<br>File-Format: application/pdf<br>File-Size: 316<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/15<br>Title: The lifecycle model of consumption and saving<br>Author-Name: Martin Browning<br>Author-X-Name-First: Martin<br>Author-X-Name-Last: Browning<br>Author-Email: martin.browning@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Nuffield College, Oxford<br>Author-Name:  Thomas F. Crossley<br>Author-X-Name-First: Thomas<br>Author-X-Name-Last:  Crossley<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200105<br>Length: 39<br>Number: W01/15<br>Abstract: <br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0115.pdf<br>File-Format: application/pdf<br>File-Size: 321<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/14<br>Title: Price and quality in the UK childcare market<br>Author-Name: Alan Duncan<br>Author-X-Name-First: Alan<br>Author-X-Name-Last: Duncan<br>Author-Email: a.duncan@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and NATSEM, University of Canberra<br>Author-Name: Gillian Paull<br>Author-X-Name-First: Gillian<br>Author-X-Name-Last: Paull<br>Author-Email: gill_p@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name: Jayne Taylor<br>Author-X-Name-First: Jayne<br>Author-X-Name-Last: Taylor<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200105<br>Length: 55 pp<br>Number: W01/14<br>Abstract: Childcare subsidies are typically advocated as a means to   making paid 
employment profitable for mothers, but also have  important ramifications for the 
use and quality of paid childcare.  Even if one is concerned primarily with the 
quantity aspect, the  quality dimension cannot be ignored. This paper provides an 
 exposition of the potential biases in estimates of price  elasticities with 
respect to quantity that do not allow for quality  variation or for the 
possibility of non-linear pricing structures.  Using an approach developed in the 
demand estimation literature, a  price measure addressing these issues is derived 
and the importance  of using this measure is tested using British data. Price is 
found  to have a negative impact on the use of formal paid care, the hours 
purchased and the quality chosen. However, failure to control for  quality 
effects and non-linearities in the price measure is shown to  generate 
significant overestimates of the price elasticities.<br>Classification-JEL: D12, J13<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0114.pdf<br>File-Format: application/pdf<br>File-Size: 985<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/13<br>Title: A measurement error approach to the study of poverty<br>Author-Name:  Rosati, N<br>Author-X-Name-First: Rosati,<br>Author-X-Name-Last:  N<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200105<br>Length: <br>Number: W01/13<br>Abstract: <br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0113.pdf<br>File-Format: application/pdf<br>File-Size: 2394<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/12<br>Title: Product market competition, efficiency and agency costs: an empirical analysis<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Creation-Date: 200105<br>Length: 32 pp<br>Number: W01/12<br>Abstract: Policy makers in Europe have been concerned that lack of   product market competition have led productivity to lag behind the  US. Theoretical models are ambiguous about the direction of the  effect that product market competition should have on productivity.  On the one hand increasing competition lowers firm's profits and  thus reduces incentives to exert effort (the Schumpeterian effect),  on the other hand it reduces agency costs (or increases the risk of  bankruptcy) thus increasing incentives to exert effort. This paper uses panel data on UK establishments over the period 1980-1996 to  investigate the relationship between product market competition and  productivity levels and growth rates. The introduction of the  European Union Single Market Programme (SMP) is used as an  instrument for the change in product market competition. The SMP was  ex ante expected to affect competition in some industries but not  others. It is shown that the Lerner Index fell in the affected  industries after the SMP by more than in the non-affected. The  results suggest that the increase in product market competition  brought about by SMP led to an increase in overall levels of  efficiency and growth rates. The sample of firms is then split into   those with a principal-agent set up and those without. The increase  in efficiency occurred in principal-agent type firms, and not in  those where managerial control and ownership were more closely  related. These results suggest that product market competition can  play an important role in reducing agency costs and may explain some  of the poor performance of European economies.<br>Classification-JEL: D2, D43, C33<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0112.pdf<br>File-Format: application/pdf<br>File-Size: 157<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/11<br>Title: The effect of a social experiment in education<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name:  M&aring;rten Palme<br>Author-X-Name-First: M&aring;rten<br>Author-X-Name-Last:  Palme<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200105<br>Length: <br>Number: W01/11<br>Abstract: The impact of compulsory schooling laws as well as the abolition of early selection by ability reamin important issues in the educational debate. These issues were the focus of a major education reform in Sweden which was implemented in the 60s. The reform was preceded by a "social experiment" ub which only a proportion of municipalities received the new school system. We use survey data linked with tax records covering 10% of one of the cohorts, who were educated during the experimental period, to evaluate the impact of the reform on educational attainment and earnings. We find significant increases in the educational attainment of individuals from poorer backgrounds. In addition we estimate the returns to education for those affected by the reform. By exploiting the differential impact of the reform by county we are able, in some cases, to distinguish its direct effect on earnings from the effect it had by increasing the quantity of education. We find that the main source of increased earnings came from increasing educational attainment.<br>Keywords: <br>File-URL:<br>File-Format: application/pdf<br>File-Size: <p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/10<br>Title: Characteristics of foreign-owned firms in British manufacturing<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Helen Simpson<br>Author-X-Name-First: Helen<br>Author-X-Name-Last: Simpson<br>Author-Email: helen.simpson@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and CMPO, Bristol<br>Creation-Date: 200105<br>Length: 38 pp<br>Number: W01/10<br>Abstract: This paper describes the characteristics of manufacturing   
establishments in Britain over the period 1980 to 1996. Particular  attention is 
paid to differences between plants of different  ownership nationality. The 
findings suggest that establishments that  are always foreign-owned have 
significantly higher labour  productivity than those that remain under domestic 
ownership. In  addition, labour productivity improves faster over time and faster 
 with age in foreign-owned establishments. The difference in labour productivity 
is matched by an equivalent difference in levels of  investment per employee. 
Establishments that change ownership  nationality do not seem to experience very 
large changes in labour  productivity levels. The proportion of skilled workers 
in the  workplace, and wages for both skilled and operative workers are  higher 
in foreign-owned establishments than domestic-owned, in line  with differences in 
labour productivity.<br>Keywords: foreign direct investment, productivity, multinational firms<br>File-URL:http://www.ifs.org.uk/wps/wp0110.pdf<br>File-Format: application/pdf<br>File-Size: 202<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/09<br>Title: No more skivvy schemes? Active labour market policies and the British New Deal for the young unemployed in context<br>Author-Name:  John Van Reenen<br>Author-X-Name-First: John<br>Author-X-Name-Last:  Reenen<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200104<br>Length: 38 pp<br>Number: W01/09<br>Abstract: The British New Deal for Young People began in January   1998. After 6 
months of unemployment, 18-24 year olds enter a  'Gateway' period where they are 
given extensive job search  assistance. If they are unable to obtain an 
unsubsidised job, then  they can enter one of four New Deal options. One of these 
is a job  subsidy ("employers' option"), the others involve full-time  education 
and training, government-provided employment  ("environmental task force") or 
voluntary work. In this paper I  evaluate the New Deal in a historical and 
international context. The  toughening of the work search criterion has evolved 
since the  Restart initiative in 1986. Using either the age-related eligibility  
criteria and/or a comparison of pilot and non-pilot areas results  suggest that 
there has been a significant increase in outflows to  employment due to the New 
Deal. Unemployed young men are now about  20% more likely to get jobs as a result 
of the policy (the stock of  youth employment is about 17,000 higher than it 
would be without the  New Deal). Much of this effect is likely to be because of 
the take  up of the employer wage subsidy, but at least a fifth of the effect  is 
due to enhanced job search. Taken as a whole I conclude that the  social benefits 
of the New Deal outweigh the costs.<br>Classification-JEL: J18, J23, J38<br>Keywords: Labour Market Programme evaluation, job search, wage subsidy, Difference in Differences<br>File-URL:http://www.ifs.org.uk/wps/wp0109.pdf<br>File-Format: application/pdf<br>File-Size: 400<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/08<br>Title: Eradicating child poverty in Britain: welfare reform and children since 1997<br>Author-Name: Mike Brewer<br>Author-X-Name-First: Mike<br>Author-X-Name-Last: Brewer<br>Author-Email: m.brewer@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and ISER, Essex University<br>Author-Name:  Paul Gregg<br>Author-X-Name-First: Paul<br>Author-X-Name-Last:  Gregg<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200104<br>Length: 48 pp<br>Number: W01/08<br>Abstract: &lt;p&gt;&lt;p&gt;Over the past 20 years the incidence of relative poverty among Britain's children has tripled. These changes are related to increased earnings inequality, growth in the number of single (lone) parent households, and an increased share of households with children with no working adult. The Labour Government has responded by adopting as a policy objective ending child poverty by 2020. Initial steps toward this end include increasing direct financial support to families with children, creating financial incentives for  work for parents, adopting more intensive case management for the  welfare caseload, and ameliorating the long-term consequences of the  deprivation poverty brings. The Working Families' Tax Credit (WFTC) is the centerpiece of the financial support innovations but there is  a broader swathe of welfare reforms which has received less attention. Overall, the U.K. system provides more generous support to the lowest-income families than is available in the U.S.,  and recent reforms have directly reduced child poverty. For most households, the reforms have reduced marginal benefit deduction  rates and increased incentives to work. Preliminary evidence suggests the changes have had greatest effect on single parents. Continued progress requires the adoption of a more specific procedure for defining and measuring child poverty.&lt;/p&gt;&lt;/p&gt;<br>Keywords: Welfare, inequality, in-work benefits, child poverty<br>File-URL:http://www.ifs.org.uk/wps/wp0108.pdf<br>File-Format: application/pdf<br>File-Size: 383<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/07<br>Title: Income variance dynamics and heterogenity<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Author-Name:  Luigi Pistaferri<br>Author-X-Name-First: Luigi<br>Author-X-Name-Last:  Pistaferri<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200104<br>Length: 53 pp<br>Number: W01/07<br>Abstract: Recent theoretical work has shown the importance of measuring microeconomic uncertainty for models of both general and partial equilibrium under imperfect insurance. In this paper the assumption of i.i.d. income innovations used in previous empirical studies is removed and the focus of the analysis placed on models for the conditional variance of income shocks, that is  related to the approporiate measure of risk emphasized by the theory. We first discriminate amongst various models of earnings determination that separate income shocks into idiosyncratic transitory and permanent components. We allow for education-specific differences in the stochastic process for earnings and for measurement error. The conditional variance of the income shocks is then modelled  as a parsimonious autoregressive process with both observable and unobserved heterogeneity. The  empirical analysis is conducted on data drawn from the 1967-1991 Panel Study of Income Dynamics.<br>Classification-JEL: G11, D12, E21<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0107.pdf<br>File-Format: application/pdf<br>File-Size: 457<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/06<br>Title: Limited financial market participation: a transaction cost-based explanation<br>Author-Name:  Monica Paiella<br>Author-X-Name-First: Monica<br>Author-X-Name-Last:  Paiella<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200104<br>Length: <br>Number: W01/06<br>Abstract: <br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0106.pdf<br>File-Format: application/pdf<br>File-Size: 344<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/05<br>Title: The dynamics of investment under uncertainty<br>Author-Name:  Nicholas Bloom<br>Author-X-Name-First: Nicholas<br>Author-X-Name-Last:  Bloom<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Steve Bond<br>Author-X-Name-First: Steve<br>Author-X-Name-Last: Bond<br>Author-Email: steve.bond@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Nuffield College, Oxford<br>Author-Name:  John Van Reenen<br>Author-X-Name-First: John<br>Author-X-Name-Last:  Reenen<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200104<br>Length: <br>Number: W01/05<br>Abstract: <br>Classification-JEL: D92, E22, D8, C23<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0105.pdf<br>File-Format: application/pdf<br>File-Size: 657<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/04<br>Title: The limits of social democracy? Tax and spend under Labour, 1974-79<br>Author-Name: Tom Clark<br>Author-X-Name-First: Tom<br>Author-X-Name-Last: Clark<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200104<br>Length: 59 pp<br>Number: W01/04<br>Abstract: In 1974 Britain elected a Labour government pledged to expand public 
spending significantly. Labour followed its programme for two years, but after 
that began to cut both government spending and taxation, anticipating the 
post-1979 Conservative agenda. This paper examines the history of this 
government, using it as a test-case for various 'New Right' economic and 
political theories that suggest that government expansion eventually hits 
structural limits. Such theoretical accounts prove unsatisfactory. By contrast, 
several short-term factors seem to have played an important constraining role. 
But an examination of the political thinking within the 1970s Labour Party 
suggests that autonomous ideological changes were the most crucial determinant of 
the policy reversal.<br>Classification-JEL: H10, H11, H50, N44<br>Keywords: State; Labour; 1970s; Social-democratic<br>File-URL:http://www.ifs.org.uk/wps/wp0104.pdf<br>File-Format: application/pdf<br>File-Size: 488<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/03<br>Title: R&amp;D and absorptive capacity: from theory to data<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Stephen Redding<br>Author-X-Name-First: Stephen<br>Author-X-Name-Last: Redding<br>Author-Email: s.j.redding@lse.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name:  John Van Reenen<br>Author-X-Name-First: John<br>Author-X-Name-Last:  Reenen<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200103<br>Length: 34 pp<br>Number: W01/03<br>Abstract: This paper presents a unified model that integrates the theoretical 
literatue on Schumpeterian endogenous growth, the microeconometric literature on 
R&amp;D and productivity, and the empirical literature on productivity 
convergence. Starting from a structural model of endogenous growth following 
Aghion and Howitt (1992, 1998), we provide microeconomic foundations for a 
reduced-form equation for Total Factor Productivity (TFP) growth that is commonly 
used in  the empirical literature. We allow a role for R&amp;D in innovation and 
technology transfer (absorptive capacity). The analysis suggests that many 
existing studies underestimate R&amp;D's social rate of return and provides an 
explanation for long-run productivity levels at the industry level.<br>Classification-JEL: O10, O30, O47<br>Keywords: Absorptive capacity, endogenous growth, R&amp;D, Total Factor<br>File-URL:http://www.ifs.org.uk/wps/wp0103.pdf<br>File-Format: application/pdf<br>File-Size: 802<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/02<br>Title: Criterion-based inference for GMM in autoregressive panel-data models<br>Author-Name: Steve Bond<br>Author-X-Name-First: Steve<br>Author-X-Name-Last: Bond<br>Author-Email: steve.bond@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Nuffield College, Oxford<br>Author-Name:  Clive Bowsher<br>Author-X-Name-First: Clive<br>Author-X-Name-Last:  Bowsher<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Frank Windmeijer<br>Author-X-Name-First: Frank<br>Author-X-Name-Last: Windmeijer<br>Author-Email: F.Windmeijer@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Bristol<br>Creation-Date: 200102<br>Length: 15 pp<br>Number: W01/02<br>Abstract: In this paper we examine the properties of a simple criterion-based, 
likelihood ratio type test of parameter restristions for standard GMM estimators 
in autoregressive panel data models. A comparison is made with recent test 
proposals based in the continuously-updated GMM criterion (Hansen, Heaton and 
Yaron, 1996) or exponential tilting parameters (Imbens, Spady and Johnson, 1998). 
The likelihood ratio type statistic is computed simply as the difference between  
the standard GMM tests of overidentifying restrictions in the restricted and 
unrestricted models. In Monte Carlo simulations we find thsi test had similar 
properties to the criterion-based  alternatives, whilst being much simpler to 
compute. All three criterion-based tests outperform conventional Wald tests in 
this context.<br>Classification-JEL: C12, C23<br>Keywords: Generalised Method of Moments; Hypothesis testing; Panel data<br>File-URL:http://www.ifs.org.uk/wps/wp0102.pdf<br>File-Format: application/pdf<br>File-Size: 297<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:01/01<br>Title: Wages, experience and seniority<br>Author-Name: Christian Dustmann<br>Author-X-Name-First: Christian<br>Author-X-Name-Last: Dustmann<br>Author-Email: c.dustmann@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Creation-Date: 200104<br>Length: 56 pp.<br>Number: W01/01<br>Abstract: In this paper we study the sources of wage growth. We identify the contribution to  such growth of general, sector specific and firm specific human capital. Our results are  interpretable within the context of a model where the returns to human capital may be  heterogeneous and where firms may offer different combinations of entry level wages and firm specific human capital development. We allow for the the possibility that wages are match specific and that workers move jobs as a result of identifying a better match. To estimate the average  returns to experience, sector tenure and firm specific tenure within this context, we develop an identification strategy which relies on the use of establishment closures. Our data source  is a new and unique administrative data set for Germany that includes complete work histories  as well as individual characteristics. We find positive returns to experience and tenure for  skilled workers. The returns to experience and tenure for unskilled workers are substantially  lower.<br>Keywords: Training, labour market, wages<br>File-URL:http://www.ifs.org.uk/wps/wp0101.pdf<br>File-Format: application/pdf<br>File-Size: 564<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/22<br>Title: The effect of school quality on educational attainment and wages<br>Author-Name: Lorraine Dearden<br>Author-X-Name-First: Lorraine<br>Author-X-Name-Last: Dearden<br>Author-Email: l.dearden@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London<br>Author-Name:  Javier Ferri<br>Author-X-Name-First: Javier<br>Author-X-Name-Last:  Ferri<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Creation-Date: 200012<br>Length: 32 pp<br>Number: W00/22<br>Abstract: The paper examines the effects of school pupil-teacher ratios and type 
of school on educational attainment and wages using the British National Child 
Development survey (NCDS). The NCDS is a panel survey which has followed a cohort 
of individuals born in March 1958, and has a rich set of background variables 
recorded throughout the individual's life. The results suggest that, once we 
control for ability and family background, the pupil-teacher ratio has no impact 
on educational qualifications or on male wages. It has an impact on women's wages 
at the age of 33, particularly those of low ability. We also find evidence that 
those who attend selective schools have better educational outcomes and, in the 
case of men, higher wages at the age of 33. The impact is higher for the type of 
individuals who are less likely not to attend selective schools, but for whom a 
comparison group does exist among those attending.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0022.pdf<br>File-Format: application/pdf<br>File-Size: 275<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/21<br>Title: Patents, productivity and market value: evidence from a panel of UK firms<br>Author-Name:  Nicholas Bloom<br>Author-X-Name-First: Nicholas<br>Author-X-Name-Last:  Bloom<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  John Van Reenen<br>Author-X-Name-First: John<br>Author-X-Name-Last:  Reenen<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200012<br>Length: 32 pp<br>Number: W00/21<br>Abstract: Patents citations are a potentially powerful indicator of technological innovation. In this paper we describe the IFS-Leverhulme patents dataset that we have constructed by combining information from the US Case-Western Patent database with UK company accounts and  share price information from the London Stock Exchange. Patents citations like patentc ounts, arehighly skewed and have a modal lag of four years. Analysing data on over 200 major British firms since 1968, we show that patents have an economically and statistically significant  impacton firm-level productivity and market value. Patent citations contain more information than simple counts. A doubling in the stock of citation-weighted patents is associated with a  four percent increase in (total factor) productivity and an eight percent increase in market value. As expected patenting and citation information feeds into market values immediately  but appears to have some additional lagged effects of productivity suggesting gradual takeup  of new technologies.<br>Classification-JEL: O33<br>Keywords: Patents, productivity, market value<br>File-URL:http://www.ifs.org.uk/wps/wp0021.pdf<br>File-Format: application/pdf<br>File-Size: 392<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/20<br>Title: Wealth inequality in the United States and Great Britain<br>Author-Name: James Banks<br>Author-X-Name-First: James<br>Author-X-Name-Last: Banks<br>Author-Email: j.banks@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name:  James P. Smith<br>Author-X-Name-First: James<br>Author-X-Name-Last:  Smith<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200011<br>Length: 80 pp<br>Number: W00/20<br>Abstract: In this paper we describe the household wealth distribution in the US 
and UK, and  compare both wealth inequality and the form in which wealth is held. 
Unconditionally,  there are large differences in financial wealth between the two 
countries at the top fifth  of the wealth distribution. And even after 
controlling for age and income differences between  the two countries, we show 
that the median US household accumulates more financial wealth than  their UK 
counterpart.  We explore a number of alternative reasons for these differences 
and reject some explanations  as implausible. These include differential receipt 
of financial inheritances or desired bequests,  and differential average rates of 
return to corporate equity or housing. While less certain, we  also argue that 
the differences that are concentrated among the older well-to-do are not likely 
due to differences in income or employment risks, savings for college expenses, 
or changes in  permanent income. Some of the observed differences are due to what 
we refer to as "initial  conditions", in particular previously high rates of 
corporate equity ownership in the US and  housing ownership among young British 
households. But since these differences existed even in  the early 1980s, initial 
conditions only provide a partial explanation. One further possibility  may be 
that due to forced and voluntary annuitization of retirement incomes, older 
British  households face considerably less longevity risk. Looking more widely, 
however, we find wealth  held in different forms across the two countries, in 
particular in housing, which to some extent  offsets the differences we observe 
in financial wealth patterns. We therefore point out that it  is important that 
comparative studies compare genuine economic phenomena (such as the ability to  
smooth consumption) rather than particular economic measurements (such as the 
level of wealth in  any one particular form).  We also argue that it is crucial 
that comparative exercises of this form acknowledge the  importance of 
institutional differences across countries, and in this particular comparison  
the role of housing markets, annuity markets and stock markets appear crucial and 
all merit  further more detailed research. On balance, we are encouraged by the 
degree to which a detailed  investigation can point to potential explanations of 
observed wealth differences between the  two countries, and such an investigation 
will also lead to a deeper understanding of the household  wealth accumulation 
process more generally.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0020.pdf<br>File-Format: application/pdf<br>File-Size: 759<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/19<br>Title: A finite sample correction for the variance of linear two-step GMM estimators<br>Author-Name: Frank Windmeijer<br>Author-X-Name-First: Frank<br>Author-X-Name-Last: Windmeijer<br>Author-Email: F.Windmeijer@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Bristol<br>Creation-Date: 200011<br>Length: 23 pp<br>Number: W00/19<br>Abstract: Monte Carlo studies have shown that estimated asymptotic standard errors of the efficient two-step generalised method of moments (GMM) estimator can be severely downward biased in small samples. The weight matrix used in the calculation of the efficient two-step GMM estimator is based on initial consistent parameter estimates. In this paper it is shown that the extra variation due to the presence of these estimated parameters in the weight matrix accounts for much of the difference between the finite sample and the asymptotic variance of the two-step GMM estimator that utilises moment conditions that are linear in the parameters. This difference can be estimated, resuling in a finite sample corrected estimate of the variance. In a Monte Carlo study of a panel data model it is shown that the corrected variance estimate approximates the final sample variance well, leading to more accurate inference.<br>Classification-JEL: C12, C23<br>Keywords: General method of moments, variance correction, panel data<br>File-URL:http://www.ifs.org.uk/wps/wp0019.pdf<br>File-Format: application/pdf<br>File-Size: 271<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/18<br>Title: Progressivity comparisons<br>Author-Name:  Valentino Dardoni<br>Author-X-Name-First: Valentino<br>Author-X-Name-Last:  Dardoni<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Peter J. Lambert<br>Author-X-Name-First: Peter<br>Author-X-Name-Last:  Lambert<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200011<br>Length: 28 pp<br>Number: W00/18<br>Abstract: Analysts should correct for distributional differences before 
undertaking local  progressivity comparisons between income tax or tax and 
benefit schedules. A transplant-and-compare procedure is advocated, involving 
'importation' of the schedule from one regime into another,  or from both into a 
reference scenario. The residual progression ordering over transplanted  
schedules then assures a global ordering of original regimes by Lorenz or Suits 
curves. The algorithm is advocated for use only when transplantation functions 
are isoelastic, and is illustrated for the  Canadian, Israeli and UK tax and 
benefit systems.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0018.pdf<br>File-Format: application/pdf<br>File-Size: 361<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/17<br>Title: Crime and economic incentives<br>Author-Name:  Steve Machin<br>Author-X-Name-First: Steve<br>Author-X-Name-Last:  Machin<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name: Costas Meghir<br>Author-X-Name-First: Costas<br>Author-X-Name-Last: Meghir<br>Author-Email: c.meghir [at] yale.edu@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Yale University<br>Creation-Date: 200009<br>Length: 33 pp<br>Number: W00/17<br>Abstract: We explore the role that economic incentives, particularly changes in 
wages at the  bottom end of the wage distribution, play in determining crime 
rates. We use data on the police  force areas of England and Wales between 1975 
and 1996. We find that falls in the wages of unskilled  workers leads to 
increases in crime. We carry out a number of experiments with different wage 
measures, including a wage measure that accounts for the effects of changes in 
the composition of employment. These reinforce the picture of a strong impact of 
wages on crime. The result that incentives play a central role is reinforced 
further by the strong impact on crime of deterrence measures and of a measure of 
the returns to crime.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0017.pdf<br>File-Format: application/pdf<br>File-Size: 141<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/16<br>Title: Comparing in-work benefits and financial work incentives for low-income families in the US and the UK<br>Author-Name: Mike Brewer<br>Author-X-Name-First: Mike<br>Author-X-Name-Last: Brewer<br>Author-Email: m.brewer@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and ISER, Essex University<br>Creation-Date: 200008<br>Length: <br>Number: W00/16<br>Abstract: The goals of income transfer systems in the US and the UK for low-income families are to
reduce poverty and welfare dependency and encourage work. Both the US and UK have
made in-work benefits a key part of their strategy through the Earned Income Tax Credit
(EITC) and Working Families' Tax Credit (WFTC) respectively. But although similar in
aims, there are significant differences in how the WFTC and EITC are structured and
how they work operationally. In both countries, the combination of in-work benefits and
welfare benefits produces a theoretical budget constraint with good financial incentives
for lone parents to take a minimum wage job, but poor incentives to increase earnings
beyond that. Help with housing costs and childcare costs reduce financial work
incentives in both countries. Two further factors make direct comparisons of financial
work incentives difficult. First, little is known about take-up rates of in-work and other
welfare benefit rates in the US and UK, but recent falls in the numbers of US welfare
benefits suggest that take-up rates may vary considerably between and within countries.
Second, the differences in assessment and payment mechanisms between the EITC and
the WFTC mean that low-income families in the UK and US may respond very differently
to apparently similar financial incentives.<br>Classification-JEL: J22, H24, H31, I38.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0016.pdf<br>File-Format: application/pdf<br>File-Size: 281<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/15<br>Title: The dynamic effects of real options and irreversibility on investment and labour demand<br>Author-Name:  Nicholas Bloom<br>Author-X-Name-First: Nicholas<br>Author-X-Name-Last:  Bloom<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200007<br>Length: 34 pp<br>Number: W00/15<br>Abstract: This paper shows that, contrary to common beliefs, the real options effect of uncertainty plays no role in the long run rate of investment. This is proven for both the standard investment model with Cobb-Douglas production and Brownian motion demand, and also for a broader class of models with multiple lines of capital, labor and general demand stochastics. Real options and irreversibility, however, are shown to play an important role in the short run dynamics of investment and labor demand. Specifically, they reduce the short run response of investment and hiring to current demand shocks, and lead to a lagged response to past demand shocks.<br>Classification-JEL: D92, E22, D8<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0015.pdf<br>File-Format: application/pdf<br>File-Size: 405<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/14<br>Title: Household portfolios in the UK<br>Author-Name: James Banks<br>Author-X-Name-First: James<br>Author-X-Name-Last: Banks<br>Author-Email: j.banks@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name:  Tanner, S<br>Author-X-Name-First: Tanner,<br>Author-X-Name-Last:  S<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200007<br>Length: 43 pp<br>Number: W00/14<br>Abstract: This paper presents a detailed analysis of the composition of household portfolios, using both aggregate and micro-data. Among the key findings are that: Most household wealth is held in the form of housing and pensions. Over time, there has been a shift away from housing towards financial assets, driven largely by the growth in life and pension funds. Liquid financial wealth (excluding life and pension funds) is not predominantly held in risky form. By far the most commonly held asset is an interest-bearing account at a bank or building society account. Of people with positive (liquid) financial wealth, more than half is held in savings accounts. The importance of risky assets in an individual's portfolio varies according to their characteristics. The unconditional portfolio share held in risky assets (i.e. averaged across those with and without any risky assets) rises with both age and total financial wealth. However, most of the variation in unconditional portfolio shares is due to differences in ownership rates as opposed to the proportion of the portfolio held in risky assets. Looking only at the people within each wealth decile who have risky assets, the conditional portfolio share is relatively constant across wealth, suggesting a possible role for entry costs or other fixed costs in explaining portfolio holdings. Multivariate analysis  shows that the conditional portfolio share in risky assets actually falls with age as classical portfolio theory would predict. Finally, the tax treatment of savings products has an effect on portfolio choice. Separate probit regressions for the ownership of tax-favoured assets and similar assets without the tax exemption, show that, controlling for other factors, marginal tax rates are important in determining asset ownership. These results are in accordance with those found by Poterba in the US.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0014.pdf<br>File-Format: application/pdf<br>File-Size: 157<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/13<br>Title: The abolition of the earnings rule for UK pensioners<br>Author-Name: Richard Disney<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Disney<br>Author-Email: richard.disney@nottingham.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Nottingham<br>Author-Name:  Sarah Tanner<br>Author-X-Name-First: Sarah<br>Author-X-Name-Last:  Tanner<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200006<br>Length: 24 pp<br>Number: W00/13<br>Abstract: The US has legislated to abolish its social security earnings test. A priori it is not possible to predict the effect this will have on work incentives. Using data from the Family Expenditure Survey we show that the abolition of the earnings rule in the UK increased the number of hours worked by men. The lack of any evidence of a reduction in hours may be a consequence of those who previously earned more than the earnings threshold deferring pension receipt at an actuarially favourable rate. This is consistent with there being little evidence of a significant change in the number of deferrals after the earnings rule was abolished.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0013.pdf<br>File-Format: application/pdf<br>File-Size: 98<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/12<br>Title: Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Steve Bond<br>Author-X-Name-First: Steve<br>Author-X-Name-Last: Bond<br>Author-Email: steve.bond@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Nuffield College, Oxford<br>Author-Name: Frank Windmeijer<br>Author-X-Name-First: Frank<br>Author-X-Name-Last: Windmeijer<br>Author-Email: F.Windmeijer@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Bristol<br>Creation-Date: 200006<br>Length: 49 pp<br>Number: W00/12<br>Abstract: This chapter reviews developments to improve on the poor performance of the standard GMM estimator for highly autoregressive panel series. It  considers the use of the "system" GMM  estimator  that relies on relatively mild restrictions on the initial condition process. This  system GMM  estimator encompasses the GMM estimator based on the non-linear moment conditions available in the  dynamic error components model and has substantial asymptotic efficiency gains. Simulations, that  include weakly exogenous covariates, find large finite sample biases and very low precision for the  standard first differenced estimator. The use of the system GMM estimator not only greatly improves  the precision but also greatly reduces the finite sample bias. An application to panel production  function data for the US is provided and confirms these theoretical and experimental findings.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0012.pdf<br>File-Format: application/pdf<br>File-Size: 422<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/11<br>Title: A recursive algorithm to generate piecewise linear budget contraints<br>Author-Name: Alan Duncan<br>Author-X-Name-First: Alan<br>Author-X-Name-Last: Duncan<br>Author-Email: a.duncan@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and NATSEM, University of Canberra<br>Author-Name: Graham Stark<br>Author-X-Name-First: Graham<br>Author-X-Name-Last: Stark<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies<br>Creation-Date: 200005<br>Length: 24 pp<br>Number: W00/11<br>Abstract: This paper introduces a recursive algorithm with which to generate complete and accurate budget constraints using static microsimulation models. We describe the generic algorithm and discuss and extension by which reasons for any change in the marginal effective tax rate may be explained. We derive continuous expressions for average tax rate (ATR), average marginal tax rate (AMTR), replacement rate (RR) and marginal effective tax rate (METR) schedules, expressed solely in terms of the marginal wage rate and 'virtual' income. A practical application serves to highlight the usefulness of this algorithm in fiscal policy analysis at micro level.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0011.pdf<br>File-Format: application/pdf<br>File-Size: 331<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/10<br>Title: What do we learn from recall consumption data?<br>Author-Name: Erich Battistin<br>Author-X-Name-First: Erich<br>Author-X-Name-Last: Battistin<br>Author-Email: e.battistin@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies<br>Author-Name:  Raffale Miniaci<br>Author-X-Name-First: Raffale<br>Author-X-Name-Last:  Miniaci<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Guglielmo Weber<br>Author-X-Name-First: Guglielmo<br>Author-X-Name-Last:  Weber<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200005<br>Length: 40 pp<br>Number: W00/10<br>Abstract: In this paper a rich and innovative dataset, the International Adult 
Literacy Survey, is used to examine the impact of functional literacy on 
earnings. The IALS surveys 12 OECD countries and sub-regions via a consistent 
questionnaire and includes a number of tests of numeracy and literacy, as well as 
basic labour market information. This paper examines the effect of these skills 
on labour market earnings for the Republic of Ireland, Northern Ireland, and for 
Great Britain. The estimates suggest that while ability has a role in determining 
earnings the dominant factor remains formal education. It is shown that, 
particularly for Great Britain, there is a positive interaction between the test 
score and education in determining earnings.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0010.pdf<br>File-Format: application/pdf<br>File-Size: 904<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/09<br>Title: Functional literacy, educational attainment and earnings - evidence from the international adult literacy survey<br>Author-Name: Kevin Denny<br>Author-X-Name-First: Kevin<br>Author-X-Name-Last: Denny<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College Dublin<br>Author-Name:  Colm Harmon<br>Author-X-Name-First: Colm<br>Author-X-Name-Last:  Harmon<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  Sandra Redmond<br>Author-X-Name-First: Sandra<br>Author-X-Name-Last:  Redmond<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200004<br>Length: 21 pp<br>Number: W00/09<br>Abstract: In this paper a rich and innovative dataset, the International Adult 
Literacy Survey, is used to examine the impact of functional literacy on 
earnings. The IALS surveys 12 OECD countries and sub-regions via a consistent 
questionnaire and includes a number of tests of numeracy and literacy, as well as 
basic labour market information. This paper examines the effect of these skills 
on labour market earnings for the Republic of Ireland, Northern Ireland, and for 
Great Britain. The estimates suggest that while ability has a role in determining 
earnings the dominant factor remains formal education. It is shown that, 
particularly for Great Britain, there is a positive interaction between the test 
score and education in determining earnings.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0009.pdf<br>File-Format: application/pdf<br>File-Size: 71<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/08<br>Title: The impacts of education and training on the labour market experiences of young adults<br>Author-Name: Kevin Denny<br>Author-X-Name-First: Kevin<br>Author-X-Name-Last: Denny<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College Dublin<br>Author-Name:  Colm Harmon<br>Author-X-Name-First: Colm<br>Author-X-Name-Last:  Harmon<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200004<br>Length: 18 pp<br>Number: W00/08<br>Abstract: This paper uses pooled cross-section data on recent school leavers in 
Ireland to model the determinants of labour market status and wages for young 
adults. Firstly we use a multinomial logit model to analyze whether individuals 
exit school to employment, unemployment or higher education. Family background is 
an important predictor for participation in higher education reflecting the 
degree of rationing in the system. The level of educational attainment influences 
the probability of entering higher education or employment. The estimates for 
earnings functions show large differences across gender with males being rewarded 
significantly higher. The returns to training are positive though biased upwards 
by sample selection particularly for females.<br>Classification-JEL: J31 J64<br>Keywords: youth, earnings, education<br>File-URL:http://www.ifs.org.uk/wps/wp0008.pdf<br>File-Format: application/pdf<br>File-Size: 56<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/07<br>Title: New methods for comparing literacy across populations: insights from the measurement of poverty<br>Author-Name: Kevin Denny<br>Author-X-Name-First: Kevin<br>Author-X-Name-Last: Denny<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College Dublin<br>Creation-Date: 200004<br>Length: 15 pp<br>Number: W00/07<br>Abstract: This paper exploits an unusual policy reform that had the effect of 
reducing the direct cost of schooling in Ireland in the late 1960s. This gave 
rise to an increased level of schooling but with effects that vary substantially 
across family background. This interaction of educational reform and family 
background generates a set of instrumental variables that are used to estimate 
the return to schooling allowing for the endogeneity of schooling. Using a 
standard Mincer type model we find a large and well-determined rate of return of 
around 12% which are substantially higher than the OLS estimates of around 7%.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0007.pdf<br>File-Format: application/pdf<br>File-Size: 51<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/06<br>Title: Education policy reform and the return to schooling from instrumental variables<br>Author-Name: Kevin Denny<br>Author-X-Name-First: Kevin<br>Author-X-Name-Last: Denny<br>Author-Email: <br>Author-Workplace-Name: Institute for Fiscal Studies and University College Dublin<br>Author-Name:  Colm Harmon<br>Author-X-Name-First: Colm<br>Author-X-Name-Last:  Harmon<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200004<br>Length: 21 pp<br>Number: W00/06<br>Abstract: This paper analyses levels of low literacy across twelve countries 
using the International Adult Literacy Survey. We go beyond existing work that 
only looks at the proportions below certain critical levels of literacy. Using 
methods developed for the measurement of poverty we calculate measures of 
literacy that are sensitive to the distribution of literacy within those defined 
as illiterate. This reveals a different pattern of the extent of literacy 
problems across countries and within some populations. These measures should be 
useful to policy makers who need to allocate resources to alleviate low literacy 
and numeracy.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0006.pdf<br>File-Format: application/pdf<br>File-Size: 72<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/05<br>Title: Direct estimation of policy impacts<br>Author-Name: Hidehiko Ichimura<br>Author-X-Name-First: Hidehiko<br>Author-X-Name-Last: Ichimura<br>Author-Email:  ichimura@e.u-tokyo.ac.jp<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Tokyo<br>Author-Name:  Christopher Taber<br>Author-X-Name-First: Christopher<br>Author-X-Name-Last:  Taber<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200004<br>Length: 43 pp<br>Number: W00/05<br>Abstract: <br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0005.pdf<br>File-Format: application/pdf<br>File-Size: 353<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/04<br>Title: Who gains when workers train? Training and corporate productivity in a panel of British industries<br>Author-Name:  John Van Reenen<br>Author-X-Name-First: John<br>Author-X-Name-Last:  Reenen<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200004<br>Length: 69 pp<br>Number: W00/04<br>Abstract: There is a vast empirical literature of the effects of training on wages that are taken as an indirect measure of productivity. This paper is part of a smaller literature on the effects of training on direct measures of industrial productivity. We analyse a panel of British industries between 1983 and 1996. Training information (and other individual productivity indicators such as education and experience) is derived from a question that has been asked consistently over time in the Labour Force Survey. This is combined with complementary industry-level data sources on value added, wages, labour and capital. We use a variety of panel data techniques (including system GMM) to argue that training significantly boosts productivity. The existing literature has underestimated the full effects of training for two reasons. First, it has tended to treat training as exogenous whereas in reality firms may choose to re-allocate workers to training when demand (and therefore productivity) is low. Secondly, our estimates of the effects of training on wages are about half the size of the effects on industrial productivity. It is misleading to ignore the pay-off firms take in higher profits from training. The effects are economically large. For example, raising the proportion of workers trained in an industry by 5 percentage points (say from the average of 10% to 15%) is associated with a 4 per cent increase in value added per worker and a 1.6 per cent increase in wages.<br>Classification-JEL: J31, C23, D24<br>Keywords: Productivity, training, wages, panel data<br>File-URL:http://www.ifs.org.uk/wps/wp0004.pdf<br>File-Format: application/pdf<br>File-Size: 590<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/03<br>Title: Identifying demand for health resources using waiting times information<br>Author-Name: Richard Blundell<br>Author-X-Name-First: Richard<br>Author-X-Name-Last: Blundell<br>Author-Email: r.blundell@ucl.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name: Frank Windmeijer<br>Author-X-Name-First: Frank<br>Author-X-Name-Last: Windmeijer<br>Author-Email: F.Windmeijer@bristol.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Bristol<br>Creation-Date: 200004<br>Length: 24 pp<br>Number: W00/03<br>Abstract: less skilled workers has deteriorated, either through their ability to secure 
jobs and/or their ability to earn a decent wage. Some have linked this decline to 
modern computing technologies. This paper surveys the evidence on the effects of 
technical change on skills, wages and employment by examining the 
micro-econometric evidence (we take this to include studies at the industry, 
firm, plant and individual levels). We focus on over 70 empirical studies that 
have used direct measures of technology (rather than associating technology with 
a residual time trend). We first point to three basic methodological problems 
relating to endogeneity, fixed effects and measurement. Our survey comes to the 
following tentative conclusions: (i) there is a strong effect of technology on 
skills in the cross section which appears reasonably robust to various 
econometric problems; (ii) there is a strong effect of diffusion of technologies 
on wages in the cross section which is not robust to endogeneity and fixed 
effects; (iii) at the firm level product innovations appear to raise employment 
growth, but there is no clear evidence of a robust effect (either positive or 
negative) of process innovations or R&D on jobs.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0003.pdf<br>File-Format: application/pdf<br>File-Size: 237<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/02<br>Title: Mapping the two faces of R&D: productivity growth in a panel of OECD industries<br>Author-Name: Rachel Griffith<br>Author-X-Name-First: Rachel<br>Author-X-Name-Last: Griffith<br>Author-Email: r.griffith@ifs.org.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Manchester<br>Author-Name: Stephen Redding<br>Author-X-Name-First: Stephen<br>Author-X-Name-Last: Redding<br>Author-Email: s.j.redding@lse.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University College London<br>Author-Name:  John Van Reenen<br>Author-X-Name-First: John<br>Author-X-Name-Last:  Reenen<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200001<br>Length: 71 pp<br>Number: W00/02<br>Abstract: Many writers have claimed that R&D has two 'faces'. In addition to the 
conventional role of stimulating innovation, R&D enhances technology transfer by 
improving the ability of firms to learn about advances in the leading edge 
('absorptive capacity'). In this paper we document that there has been 
convergence of TFP within a panel of industries across thirteen OECD countries 
since 1970. Furthermore, we find evidence that both R&D and human capital appear 
statistically and economically important in this catch up process as well as 
stimulating innovation directly. Trade, by contrast, plays a more modest role in 
productivity growth.<br>Classification-JEL: O0, O3, O4<br>Keywords: R&D; human capital; Total Factor Productivity; convergence<br>File-URL:http://www.ifs.org.uk/wps/wp0002.pdf<br>File-Format: application/pdf<br>File-Size: 407<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:00/01<br>Title: Optimal taxation and risk sharing data<br>Author-Name: Hamish Low<br>Author-X-Name-First: Hamish<br>Author-X-Name-Last: Low<br>Author-Email: Hamish.Low@econ.cam.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and Trinity College, Cambridge<br>Author-Name:  Daniel Maldoom<br>Author-X-Name-First: Daniel<br>Author-X-Name-Last:  Maldoom<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 200001<br>Length: 41 pp<br>Number: W00/01<br>Abstract: This paper analyses the trade-off between the incentive effects of 
increased uncertainty and the welfare benefits of risk-sharing in the design of 
optimal tax schedules. We use numerical methods to characterise the tax schedule 
and to give comparative static results of changing risk aversion, uncertainty and 
the cost of effort. Increased uncertainty may increase effort for precautionary 
reasons, but leads to greater risk sharing in the optimal tax schedule. 
Similarly, a reduced cost of effort leads to greater risk sharing. Incentives to 
work are induced through punishment at low output realisations if risk aversion 
is high, and through reward of high output if risk aversion is low. We also 
consider introducing extra randomisation into the rax schedule to further 
incentivise individuals. This is only optimal if the form of the tax schedule is 
constrained, for example to be linear.<br>Keywords: <br>File-URL:http://www.ifs.org.uk/wps/wp0001.pdf<br>File-Format: application/pdf<br>File-Size: 892<p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:99/28<br>Title: Nonparametric tests of stochastic dominance in bivariate distributions, with an application to UK data<br>Author-Name: Ian Crawford<br>Author-X-Name-First: Ian<br>Author-X-Name-Last: Crawford<br>Author-Email: Ian.Crawford@economics.ox.ac.uk<br>Author-Workplace-Name: Institute for Fiscal Studies and University of Oxford<br>Creation-Date: 199901<br>Length: <br>Number: W99/28<br>Abstract: This paper make straightforward extensions to Anderson's (1996) nonparametric
statistical tests of stochastic dominance criteria to bivariate distributions.
These test are applied to a time series of cross-section datasets on household level
total expenditure and non labour market time in the UK.<br>Classification-JEL: C14, D30<br>Keywords: Social welfare, stochastic dominance, nonparametric statistical<br>File-URL:<br>File-Format: application/pdf<br>File-Size: <p>Template-Type: ReDIF-Paper 1.0<br>Handle: RePEc:ifs:ifsewp:99/27<br>Title: Has technology hurt less skilled workers? A survey of the micro-econometric evidence<br>Author-Name:  Lucy Chennells<br>Author-X-Name-First: Lucy<br>Author-X-Name-Last:  Chennells<br>Author-Email: <br>Author-Workplace-Name:<br>Author-Name:  John Van Reenen<br>Author-X-Name-First: John<br>Author-X-Name-Last:  Reenen<br>Author-Email: <br>Author-Workplace-Name:<br>Creation-Date: 199901<br>Length: 69 pp<br>Number: W99/27<br>Abstract: There is a growing concern in advanced countries that the position of less skilled workers has deteriorated, either through their ability to secure jobs and/or their ability to earn a decent wage. Some have linked this decline to modern computing technologies. This paper surveys the evidence on the effects of technical change on skills, wages and employment by examining the micro-econometric evidence (we take this to include studies at the industry, firm, plant and individual levels). We focus on over 70 empirical studies that have used direct measures of technology (rather than associating technology with a residual time trend). We first point to three basic methodological problems relating to endogeneity, fixed effects and measurement. Our survey comes to the following tentative conclusions: (i) there is a strong effect of technology on s